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German economy to grow weaker than expected in 2021

16 Jun 2021 02:51 PM
The Ifo economic institute predicted on Wednesday a 3.3% weaker-than-expected growth for the German economy this year as supply bottlenecks in manufacturing could drag down industrial production.

The lower growth forecast by the Ifo institute for Europe's largest economy represented a 0.4% drop compared to the previous estimate for March.

However, the Ifo Institute raised the country’s forecast for 2022 to 4.3% gross domestic product growth from 3.2% previously estimated.
The recovery from the COVID19 pandemic and supply bottlenecks for chips, timber and other materials have pushed the prices higher, leading IFO to expect an inflation jump to 2.6% this year from 0.6% in 2020 before easing back to 1.9% in 2022.

The strong recovery is likely to Increase domestic demand and with it imports, which are expected to exceed exports in 2021 and 2022.

This will help reduce the huge German current account surplus to 5.8% of economic output in 2021 and 4.9% in 2022, dragging it below the EU's indicative level of 6% for the first time in many years, the institute said.

The Ifo’s forecast for growth is less optimistic than the Bundesbank's estimate, which forecasts 3.7% growth for this year and 5.2% next year.

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