OECD SEES GERMAN GROWTH HIT BY LOW DOMESTIC DEMAND
West German economic growth will slow to
1.5 pct this year from 2.4 pct in 1986 due to weak domestic
demand and tougher competition from abroad, the Organisation
for Economic Cooperation and Development (OECD) said in its
semi-annual review of the world economy.
    This view is less favourable than the West German
government's forecast of a growth rate of under two pct this
year, but is in line with forecasts by independent economic
institutes of growth ranging from 1.5 to two pct.
    The OECD said that the economy should pick up next year,
with the gross national product rising by two pct in real
terms.
    The OECD said it assumed the German economy was passing
through a period of temporary weakness and there would be some
recovery in business confidence in the near future.
    But it warned that the key to an improvement in the economy
was higher domestic demand, which is only forecast to rise by
2.5 pct this year and 2.75 pct in 1988, below 1986's 3.7 pct.
    While noting that the government is bringing forward a five
billion mark tax reform to January 1988, the OECD said that "the
medium to longer-term performance of the West German economy
could be improved by reduction of subsidies - which would allow
relatively lower tax rates."
    Since the OECD report was compiled, the West German Federal
Statistics Office has released figures showing that the GNP
actually fell 0.5 pct in real terms in the first quarter of
this year compared with the final three months of 1986.
    Diplomatic sources here said that West Germany appeared
likely to finish the year with the lowest growth rate of any of
the Group of Seven leading industrial nations.
    West Germany's current account surplus, the target of
considerable criticism by the Reagan administration, is
expected to rise slightly to 37 billion dlrs this year from
35.8 billion in 1986, before declining to 29 billion dlrs in
1988.
 REUTER
