Germany is fighting an uphill battle and its economy has slipped a couple of times along the way. Still, an observer believes that the worst is over, and the country-related exchange traded fund (ETF) may have an easier path to traverse in the future.

The ZEW think tank stated that Germany’s economic-expectation index fell to 50.4 points from 51.1 points in November, and the think tank believes the economy is “still at the bottom of a recession,” report Nina Koeppen and Geoffrey T. Smith for The Wall Street Journal.

The Ifo think tank, on the other hand, projects a 1.7% economic expansion for 2010 and growth of 1.2% in 2011. Germany’s government is a little more pessimistic about 2009: It expects an economic contraction of 5% this year, followed by a 1.2% growth in 2010. Growth will remain subdued because of dissipating fiscal-stimulus measures and weak financial conditions. [ETFs to play Europe’s recovery.]

Carsten Brzeski, economist at ING Bank, says the German economy needs to expand upon self-sustainability by increasing domestic demand and “tax cuts for households and companies could help.” Currently, a smaller pool of workers, coupled with slower wage growth, could translate into weaker consumer spending in the months to come.

However, the Ifo business climate index rose to 94.7 points, a high last seen in July 2008, which has stoked hopes that the rebound is on course, writes David Rising for The Associated Press. The index is based on firms in manufacturing, construction, wholesaling and retailing. The long-term average is just below 96.

Germany’s government has approved a “growth acceleration law” that will be in effect in January. The law is supposed to bring tax relief of about $12.2 billion a year. [Why Germany’s ETF is forecast for growth.]

For more information on Germany, visit our Germany category.

  • iShares MSCI Germany Index (NYSEArca:EWG): up 22.3% year-to-date

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

Subscribe to our free daily newsletters!
Please enter your email address to subscribe to ETF Trends' newsletters featuring latest news and educational events.