Stay up to date with notifications from The Independent

Notifications can be managed in browser preferences.

Economic institutes slash Germany's growth forecast

Germany’s leading economic institutes have slashed their forecast for Europe’s biggest economy

Via AP news wire
Thursday 14 October 2021 09:55 BST
Germany Economy
Germany Economy (Copyright 2021 The Associated Press. All rights reserved)

Your support helps us to tell the story

From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.

At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.

The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.

Your support makes all the difference.

Germany s leading economic institutes on Thursday slashed their forecast for Europe s biggest economy, saying output is being held back by global supply bottlenecks and lingering restraints on personal contact amid the pandemic.

The experts cut their growth forecast for this year to 2.4% from the 3.7% they had forecast earlier this year.

They said, however, that during the course of 2022 the economy should return to normal capacity utilization as the adverse effects of the pandemic and supply bottlenecks are gradually overcome. They raised the 2022 growth forecast to 4.8% from 3.9% in 2022.

Germany's manufacturing and export-heavy economy has been hit by shortages of a range of parts and raw materials as global supply chains struggle to cope with the rebound in demand post-pandemics, as well as by higher input prices.

That has led to talk of a “supply chain recession." In particular, the auto industry has suffered from lack of semiconductor components for the many electronic functions in today's automobiles, forcing them to cut back production. Unusually high natural gas prices have forced big chemical firms to cut back production of ammonia, a key ingredient in fertilizer.

Additionally, the report said that “a normalization of contact-intensive activities cannot be expected” in the current year. Service, sports and entertainment businesses have suffered large losses from the pandemic and still face some public reluctance as well as capacity limits and vaccination requirements for entry.

At the same time, consumers are expected to face higher inflation than has been usual in recent years. The institutes expect consumer prices to rise by 3% in the current year and by 2.5 % in 2022, while the public budget deficit is expected to fall from 4.9% in relation to gross domestic product in the current year to 2.1% in the following year.

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in