Delivery bottlenecks, but also the corona crisis, are putting the German economy under pressure.
(Photo: dpa)
Kiel After the Munich Ifo and the IWH Halle, the Kiel Institute for the World Economy (IfW) has now lowered its growth forecast due to the fourth corona wave and ongoing delivery bottlenecks. The gross domestic product will grow by 4.0 percent in the coming year, much more slowly than predicted in September at 5.1 percent, according to the forecast published on Wednesday.
“The recovery of the German economy is being slowed down again,” explained the researchers. As in previous waves, the infection process particularly inhibits the contact-intensive service providers. If the strain from the pandemic subsided in spring, a strong recovery will begin. “The economic activity is likely to develop a lot of momentum because the supply bottlenecks, which are currently heavily burdening industrial production, are likely to subside,” says the IfW.
For 2023, the institute screwed up its growth forecast from 2.3 to 3.3 percent. For the year that is coming to an end, an increase in gross domestic product of 2.6 percent is expected. In 2020 it fell by 4.6 percent due to the corona crisis. The pre-crisis level is not expected to be reached until the second quarter of next year – three months later than previously forecast.
The strong inflation will not go away anytime soon. “Inflation will remain high for the time being, also because the supply bottlenecks continue to increase manufacturing costs and reduce the supply of consumer goods,” the IfW predicted. For example, consumer prices are likely to rise by an average of around three percent in the coming year as well as in the coming year, and then by two percent in 2023. At 5.2 percent, the inflation rate is currently at its highest level in almost 30 years.
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At the same time, private households have accumulated additional savings of around 200 billion euros since the beginning of the pandemic “and are therefore very willing to pay”. That supports private consumption.
The public budget deficit is expected to more than halve to 1.8 percent of the gross domestic product in the coming year due to the easing burdens caused by the pandemic. The minus should then melt to 1.4 percent in 2023. The IfW expects an improvement in the labor market. The number of employees is expected to average around 45.5 million in 2023. That would be around 600,000 more than in 2020. The unemployment rate should also fall to 5.0 percent.
More: Ifo significantly lowers economic forecast