The economy is facing a period of weakness reflecting a worldwide loss of confidence and lower world trade growth, which usually hits Germany more than others through weaker exports and investment. Economic activity is expected to recover gradually during 2012 as uncertainty declines and trade picks up. Growth rates may then rise above potential from around mid-2012, given the absence of underlying imbalances in household and corporate balance sheets and only moderate fiscal consolidation needs. Unemployment is projected to remain close to historically low levels, supporting consumer confidence. The fiscal situation improved rapidly due to both structural and cyclical factors and, so long as the weakening of growth is temporary, it is unlikely to derail this improvement.