Brexit would significantly weaken German growth: economic institute

A withdraw of Britain from the European Union (EU) would significantly weaken German economic growth as it would hit German exports directly and lead to financial market turmoil and other negative effects, warned a leading German economic institute on Wednesday.

"The economic growth in Germany is likely to be relatively robust in this year and the next, when a Brexit is avoided," said Marcel Fratzscher, President of German Institute for Economic Research (DIW).

The Berlin-based institute forecast the German economy to grow by 1.7 percent due to strong domestic demand in 2016 and by 1.4 percent in 2017. However, it predicted that a Brexit would knock off 0.1 percentage points from the growth in the current year and 0.5 percentage points in 2017.

"The Brexit discussion creates a high uncertainty. If the British people choose to leave the EU, that will cost the German economy in this year already," said DIW's chief economist Ferdinand Fichtner.

According to the institute, a Brexit will cost German exports about 15 billion euros (about 16.95 billion U.S. dollars) in 2017, while other indirect effects, such as financial market turmoil, declining foreign investment and rising tariffs, are difficult to estimate.

Britain was Germany's fifth biggest trading partner in 2015 with a total foreign trade volume of 127.5 billion euros. Some 2,500 German companies have subsidiaries in the country.

Earlier surveys found that most German companies were unsettled by a possible Brexit decision in a referendum next week. Some 61 percent of companies said they would scale back investment in Britain if the country leaves Europe. (1 euro = 1.13 U.S. dollars) Endit