Lockdown Seen Delaying Recovery of German Economy But Strong Recovery Ahead
April 15 2021 - 4:33AM
Dow Jones News
--The German economy is seen growing 3.7% in 2021 and 3.9% in
2022
--A strong economic recovery is expected in the second half
--The economy is expected to return to normal output levels at
the start of 2022
By Maria Martinez
The new lockdown in Germany will delay the economic recovery but
as soon as the risks of infection have been averted, a strong
recovery will begin, a group of German economic research institutes
said.
In their joint spring report, economists forecast an increase in
gross domestic product of 3.7% in 2021 and 3.9% in 2022. The new
wave of infections and the associated containment measures led to
the downward revision of the forecast for 2021 by 1 percentage
point compared to the fall forecast of 2020.
"Economic output is likely to have dropped by 1.8% in the first
quarter due to the continuing shutdown," Torsten Schmidt, chief
economist at the Leibniz Institute for Economic Research, said.
The economy is expected to return to normal output levels at the
start of 2022, according to the joint forecasts.
"We expect a vigorous expansion of economic activities as the
measures are gradually lifted over the course of the six months
through the summer, especially in the services sector that was
particularly affected by the pandemic," Mr. Schmidt said.
Employment is also likely to gain momentum in view of the
expected easing of restrictions, economists said. On average,
employment is expected to rise by 26,000 over 2021. The rise is
estimated at 539,000 over the coming year, with prepandemic levels
being reached in the first half of 2022.
Public budgets are expected to show a deficit of 159 billion
euros ($190 billion) in 2021, slightly higher than in the previous
year. In relation to GDP, the general government budget deficit is
expected to remain roughly the same at 4.5% in 2021 and to drop
significantly to 1.6% in 2022.
How the pandemic develops remains the most significant downside
risk to the outlook. Bottlenecks and delays might still occur in
the delivery of vaccines and tests, the economic research groups
warned.
Write to Maria Martinez at maria.martinez@wsj.com
(END) Dow Jones Newswires
April 15, 2021 04:18 ET (08:18 GMT)
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