German industry is suffering from global delivery bottlenecks. Rising numbers of infections are damaging the recovery in the service sector.
(Photo: dpa)
Berlin The German Institute for Economic Research (DIW) is drastically lowering its economic forecast for this year due to the stagnating production in the industry. The gross domestic product is likely to grow by just 2.1 percent this year, as the Berlin researchers predicted on Thursday.
In June they had expected an increase of 3.2 percent. “The German economy is only slowly winding its way out of the pandemic,” emphasized the DIW economists. The global supply bottlenecks would hit the local industry hard. “As a result, domestic production stalled despite high demand,” it said. “The service industry is also weakening again with increasing numbers of infections.”
On the other hand, the upswing should be all the stronger in the coming year. The DIW raised the growth forecast here from 4.3 to 4.9 percent. “If the supply bottlenecks resolve in the coming year, the industry should take off,” the institute expects. By the end of 2022, the economy could have reached its pre-crisis level again. It fell by 4.6 percent in 2020 because of the Corona crisis.
Because of the rise in oil prices and the return to normal VAT, the DIW is expecting an average inflation rate of 3.0 percent this year – it would be the highest since 1993. “These effects will not apply in the coming year,” it said. Nonetheless, inflation is likely to remain somewhat higher at around 2.0 percent, “as the companies pass on some of the rising production costs due to the scarce advance payments”.
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