Germany's IfW think tank downgraded its growth projection for both 2012 and 2013 due to weak domestic investment and slowing global growth.
The Kiel-based institute forecasts the largest Eurozone economy to grow 0.8 percent this year, marginally below the prior estimate of 0.9 percent. The growth estimate for 2013 was downgraded to 1.1 percent from 1.7 percent.
According to IfW, the labor market dynamics will be too weak. Nonetheless, unemployment will remain below the 3-million level, it said. The official unemployment rate is expected to increase to 7 percent next year from 6.8 percent in 2012.
Further, the think tank expects average inflation to remain near the 2 percent level in both 2012 and 2013, but rising up to 2.4 percent over the course of next year.
The government budget is likely to be near balance both in 2012 and 2013, the institute said. The budget balance is seen at -0.1 percent of GDP.
Another economic think tank RWI on Wednesday reduced its growth estimate for this year to 0.8 percent and next year projection to 1 percent.
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