Ifo Institute lowers growth forecast to 2.5 percent

Munich / Frankfurt (dpa) – The Ifo Institute has significantly lowered its growth forecast for the German economy due to the ongoing supply bottlenecks in the industry .5 percent increase – 0.8 percentage points less than predicted in June: “The strong recovery after Corona originally expected for the summer will continue to be postponed,” said Ifo economic chief Timo Wollmershäuser on Wednesday.

Although the order books are full, “industrial production is shrinking as a result of supply bottlenecks for important intermediate products,” said Wollmershäuser. The global demand for durable consumer goods and electronic items has brought many manufacturers of intermediate products to their capacity limits. Changed flows of goods presented the global supply chains with enormous challenges. The decline in industrial production should continue until the end of the year. Only «next year we can expect a strong recovery in industry».

Private consumption was the mainstay of private consumption

2020 was Germany’s economic performance slumped by 4.9 percent compared to the previous year. The main pillar of the recovery is currently private consumption, said Wollmershäuser. After the removal of many corona restrictions, trade and services ran better again. “The economy is divided.” The number of unemployed is expected to fall from 2.7 million this year to 2.6 million and next year to 2.4 million. “Short-time working was also noticeably reduced and will reach its pre-crisis level in the coming year,” the economic researchers predicted.

The inflation rate is likely to rise to 3.0 percent this year, which is expected for the coming year Institute an inflation rate of 2.3 percent. The prices for energy, in gastronomy and in some service sectors are currently rising. If the supply bottlenecks persist and higher prices for preliminary products are passed on to consumer prices, inflation could also be somewhat higher. The national deficit – the new indebtedness of the federal government, states, municipalities and social security funds – should reach 157 billion euros this year.

Better prospects for 2022

For 2022 the Munich economic researchers expect 5.1 percent economic growth – provided that the next federal government implements the currently agreed economic and financial packages. A different tax burden would of course have an impact on the economy, said Wollmershäuser.

For the current year, the ifo Institute had 3.7 percent growth in March and 3.3 percent growth in June predicted. Other research institutes had recently lowered their forecasts. The RWI in Essen expects 3.5 percent growth this year, the IWH in Halle 2.2 percent, and the DIW in Berlin 2.1 percent. The leading institutes want to present a joint autumn forecast in mid-October.

The chief economists of the private banks in Germany see the German economy on a “recovery course with stumbling blocks”. With 3.3 percent growth, it should “reach its pre-crisis level again by the end of the year,” said the chief executive of the BdB banking association, Christan Ossig. In addition to lively world trade, the main driver is private consumption. “The forced saving through Corona seems to be over, the catch-up effects will continue into next year.” The biggest risks are the supply and production bottlenecks in industry and Corona. In order for the economy not to lose momentum after the election, a “coalition with the strength to set out” is needed quickly.

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