Ifo Institute Cuts Its 2021 German Economic Growth Forecast to 3.3%
June 16 2021 - 4:28AM
Dow Jones News
By Maria Martinez
The Ifo Institute has lowered its forecast for economic growth
for Germany in 2021 to 3.3% from 3.7% forecast in March, because of
bottlenecks in the supply of intermediate products.
"Reopening businesses triggered a strong recovery, but this is
now getting pushed back a bit further than we thought in the
spring," Timo Wollmershaeuser, head of forecasts at Ifo, said.
In contrast, the Ifo Institute raised its forecast for 2022 to
4.3% gross domestic product growth from 3.2% previously
estimated.
According to the Ifo Institute calculations, the cost of the
coronavirus crisis for the years 2020 to 2022 amounts to 382
billion euros ($463 billion). Given these estimates, the German
economy would grow during that time period by an average of 1.2%
per year.
Given the strong recovery, the number of short-time workers,
which was still 2.3 million in May, is expected to fall rapidly and
reach its pre-crisis level of about 100,000 next year, the Ifo
Institute said.
The number of unemployed people should fall more slowly, from
2.70 million, or 5.9% of the workforce, in 2020 to 2.65 million, or
5.8%, this year and then 2.4 million, or 5.2%, in 2022, the Ifo
Institute said.
Ifo's analysts expect the inflation rate to accelerate
temporarily, from 0.6% in 2020 to 2.6% this year, driven mainly by
higher energy prices and the renewed increase in value-added tax.
After that, the rise in consumer prices should level off again at
1.9% in 2022.
The German government's funding gap is expected to initially
widen slightly to EUR150.4 billion in 2021 from EUR149.2 billion in
2020. Next year, it is predicted to narrow sharply to EUR49.6
billion, although Ifo highlighted that this outcome depends on the
election results.
Foreign trade will increase significantly, with exports growing
by 10.4% this year after contracting by 9.4% in 2020. Imports
should even grow by 11.4% after contracting by 8.4% last year. In
2022, the increases will be smaller, 5.6% in exports and 7.3% in
imports, the Ifo Institute said.
This means Germany's current-account surplus will fall from
EUR231 billion to EUR206 billion before reaching EUR184 billion.
The surplus would thus be below the 6.0% mark, which the European
Union considers critical, for the first time in years in 2021 and
2022.
Write to Maria Martinez at maria.martinez@wsj.com
(END) Dow Jones Newswires
June 16, 2021 04:17 ET (08:17 GMT)
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