Germany Cuts 2021 Growth Forecast, Raises Outlook for 2022
Germany expects growth this year to be significantly weaker than predicted, as the lingering effects of the pandemic and a supply squeeze hinder a revival of Europe’s biggest economy.
The cut in the 2021 outlook to 2.6% -- compared with a prediction of 3.5% published at the end of April -- reflects a scarcity in some raw materials and rising energy prices, particularly for gas, Economy Minister Peter Altmaier said Wednesday in an interview with ARD television.
The government expects a “boom” to take effect only next year, and has raised its forecast for 2022 GDP growth to above 4% from 3.6%, added Altmaier, who is due to present the new outlook at a news conference at 11 a.m. in Berlin.
“The precondition is that we stabilize international supply chains, and, for example, make sure that more of the chips that are built into almost every device, especially cars, are produced,” Altmaier said.
Germany has struggled to maintain growth momentum in recent months, with its manufacturing-heavy and export-dependent economy particularly exposed to supply disruptions.
Gauges of business and investor confidence have been declining steadily, and surveys suggest weakness is spilling into the services sector as rising energy prices dent consumer confidence and crimp spending.
The government’s growth forecast for this year is slightly more upbeat than joint predictions published this month by the nation’s leading research institutes, while its outlook for next year is significantly less optimistic. The institutes cut their 2021 outlook to 2.4% from 3.7% and raised their 2022 estimate to 4.8% from 3.9%.
Separately, a newspaper report said that the government expects Germany’s public-sector budget deficit to be narrower than expected this year.
The finance ministry had expected a shortfall of 9% for 2021, but now sees the deficit at about 7.25% of gross domestic product, Handelsblatt newspaper reported, citing a document sent to the European Commission. It’s expected to narrow to 3.25% of GDP next year, the paper said.
Germany’s debt to GDP ratio is seen at 72.25% of GDP at the end of this year, down from an April prediction of 74.5%, and is expected to drop to 67.25% of GDP by 2025, the paper added.
The economy ministry’s twice-yearly forecasts help guide budget planning, and these are almost certainly the final ones to be prepared by the current government under Chancellor Angela Merkel.
Finance Minister Olaf Scholz, who led his Social Democratic party to victory in last month’s election, is aiming be confirmed as Germany’s new chancellor in early December at the head of a coalition with the Greens and the business-friendly FDP.
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