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Mixed forecasts for German economic growth in 2021

March 26, 2021


Abstract : Economic experts on Wednesday painted a mixed picture of the prospects for Germany's economy this year, with some more optimistic about growth than others.

Economic experts on Wednesday painted a mixed picture of the prospects for Germany's economy this year, with some more optimistic about growth than others.

The German economy is to grow by 4.9 percent in 2021 despite an extended coronavirus lockdown, the Macroeconomic Policy Institute (IMK) said.

Gross domestic product (GDP) will continue to grow by 4.2 percent in 2022, according to IMK's economic forecast.

"Unfortunately, the coronavirus pandemic has not yet been defeated, and risks remain," said the institute's director, Sebastian Dullien.

The main forces of growth this year are foreign trade and private consumption, which will also become the dominant growth factor in 2022, the institute said.

However, the forecast is "fraught with considerable uncertainty," Dullien said, adding that it was difficult to estimate how severe the third wave of coronavirus infections would be.

Other possible dangers include a wave of insolvencies greater than previously expected, according to the institute.

Meanwhile, the Munich-based Ifo economic research institute on Wednesday lowered its 2021 forecast due to the ongoing lockdown in Germany.

While the experts had still expected in December that the economy would grow by 4.2 percent in 2021, they now readjusted the figure to 3.7 percent.

"The coronavirus crisis is dragging on and is pushing back the expected strong upturn," ifo head of forecasts Timo Wollmershaeuser said.

The coronavirus crisis is expected to cost Germany 405 billion euros (479 billion dollars) by the end of next year, measured in terms of lost economic output, he added.

Germany's economic output declined by 4.9 percent last year. The number of unemployed is expected to decline slightly this year, from 2.7 million to 2.65 million, or from 5.9 to 5.8 percent, according to the ifo forecast.

Consumer prices are expected to rise by 2.4 percent.

However, the forecast depended on the further course of the crisis, the researchers emphasized.

"If sales in the service sectors directly affected by the coronavirus crisis were to remain at the low level of the first quarter for another three months, the increase in economic output this year would be 0.3 points lower and would only amount to 3.4 percent," Wollmershaeuser said.

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Keyword: German economic growth

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