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.
  

