Leading economists dramatically lower their economic forecasts for 2021

Strong growth, falling unemployment, falling public deficit: according to the main economic institutes, the future German government may start its first year with an economic tailwind. Gross domestic product is expected to grow 4.8% in 2022, twice as fast as 2.4% this year, researchers said in their fall forecast on Thursday, confirming a Reuters report on Wednesday.

In the spring, the institutes had forecast a growth of only 3.9% for the coming year in their joint diagnosis for the German government. Due to the severe materials bottlenecks in the industry, the recovery for the past year will be somewhat weaker: over 3.7% was previously expected here. In 2023, Europe’s largest economy is expected to grow by 1.9%. In 2020, it decreased by 4.6% due to the Corona crisis.

“The economic situation in Germany continues to be marked by the Corona pandemic,” the institutes said. “A full normalization of contact-intensive activities is not expected in the short term.” Additionally, supply bottlenecks – such as semiconductors, which are critical to the automotive sector – hamper the industry. “During 2022, the German economy is expected to return to normal capacity utilization,” he said.

Inflation also increased in 2022

The situation on the labor market is expected to improve gradually. At just under 45.4 million, the number of working people is expected to rise again to pre-crisis levels next year and rise again to almost 400,000 in 2023. Unemployment is expected to fall to 2.356 million d ‘right here, but it would still be around 89,000 more than in 2019.

The takeover is also filling the coffers of the state. This year the deficit is still expected to be 173.7 billion euros, or 4.9% of gross domestic product, due to Corona costs, but in 2022 it is expected to fall to 80.5, or 2.1 %. In 2023, the black zero could be closer: the deficit should then fall to 35.1 billion, or 0.9%.

Economists expect inflation to drop. Due to rising energy prices, inflation is expected to average 3.0% this year, the highest rate in 27 years. But it is expected to fall to 2.5% next year and 1.7% in 2023.

In September, consumer prices rose 4.1%, the fastest pace since 1993. This was also due to a number of special effects – such as the extremely low starting level of commodity prices. , the catch-up effects linked to the pandemic and containment, and the temporary reduction of VAT in the second half of 2020 to combat the Corona crisis.

The joint economic forecasts serve as the basis for the German government’s own projections, which in turn form the basis of the tax estimate. The report is prepared under the direction of RWI in Essen, DIW in Berlin, the Ifo Institute in Munich, IfW in Kiel and IWH in Halle.

Image by Mohamed Hassan

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