2012.06.08 15:21:06 UPDATE: Bundesbank: Greek, Spain Pose Risks to German Growth

--German central bank revises 2012 GDP forecast upward due to strong 1Q --German central bank lowers 2013 GDP growth forecast to 1.6% from 1.8% --Central bank head says German growth could be faster if euro-zone crisis resolved --Germany is benefiting from low interest rates, safe-haven status, emerging-market rebound (Adds details, background from paragraph two.) By Margit Feher FRANKFURT--Germany's economic growth faces risks from Greece's possible exit from the euro-zone and Spain's deepening banking problems, the Bundesbank said Friday, revising its growth forecast upward for this year and downward for 2013. The Bundesbank said in a semi-annual report it continues to expect German gross domestic product growth to accelerate this year and next from a relatively weak fourth quarter of 2011. After the first three months of 2012 delivered a faster pace of expansion than policy makers estimated, the central bank said it was raising its forecast for GDP expansion in 2012 to 1.0%, from 0.6% estimated in December. Provided global growth improves and the euro-zone sovereign debt crisis doesn't escalate, Germany's economy will expand 1.6% next year, the Bundesbank said. That's lower than its previous estimate of 1.8%. "The world economy has regained its footing," the report said. "Economic growth in industrial countries is likely to increase again gradually but remain subdued overall. The Asian emerging economies in particular are increasingly bolstering growth." "If confidence is restored more quickly than we assume in the baseline scenario, the very favorable financing conditions would help Germany to post faster growth," the report quoted Jens Weidmann, head of the Bundesbank, and also a member of the European Central Bank's governing council, as saying. Germany has been benefiting from the European Central Bank's historic low interest rates as well as from its safe-haven status, which has driven the country's borrowing rates down to around zero, for some maturities of debt. Record-low unemployment could buoy domestic demand, particularly private consumption, which has been rising only moderately as high oil prices have been reducing consumers' disposable income, the bank said. It warned the domestic economy faces a potential fallout from Greece's repeat general elections June 17, which may lead to the nation's exit from the euro zone, and Spain's need to recapitalize its banking sector. "Should the resulting renewed tensions in the financial markets prove not to be temporary and economic activity in the hardest-hit euro-area countries turn out to be weaker than already assumed in the baseline scenario, this would put a noticeable strain on Germany," the Bundesbank said. Assuming that oil prices decline moderately, German inflation looks likely to slow from last year's annual average of 2.5%, the Bundesbank said. It now sees this year's inflation at 2.1%, revised from 1.8% in December and above the ECB's target of close to but less than 2%. The bank Friday also changed its inflation forecast for next year to 1.6% from 1.5% in December. Write to Margit Feher at margit.feher@dowjones.com (END) Dow Jones Newswires June 08, 2012 09:21 ET (13:21 GMT)