FRANKFURT, Dec 9: Growth of the German economy will slow sharply next year as the crippling debt crisis puts the brakes on activity in Europe's economic powerhouse, the Bundesbank said on Friday.

“Following a 3.0 per cent rise in economic output in the current year, the pace of expansion in Germany is likely to fall perceptibly to 0.6 percent in 2012,” the German central bank wrote in its regular monthly report.

That represented a downgrade in the Bundesbank's growth forecast for next year after it had previously been pencilling in economic expansion of 0.75 per cent.The sovereign debt crisis harboured “considerable downside risks,” the central bank warned, but added: “Even so, the domestic conditions for an extended, broadly based upswing are still intact.”

The Bundesbank said its latest projections were based on the assumption that there would be no further significant escalation of the government debt crisis.

It was working from a baseline scenario where current uncertainty on the part of investors and consumers would “gradually recede somewhat”, enabling the euro area to gradually return to a sound growth path, the Bundesbank wrote.

“Under these conditions, Germany might see gross domestic product growth of 1.8 per cent in 2013,” which effectively meant the German economy “would be operating, by and large, at normal capacity,” it said.

In the near term, however, the German economy would face “a lean period in the winter months.”

That view was shared by the economy ministry in Berlin, which said that “following strong growth so far this year, the economy will shift into a lower gear in the fourth quarter.”

In its own regular monthly report, the ministry attributed the anticipated slowdown less to domestic factors than to a “cloudier international and European outlook in face of the debt crisis. —AFP