By Maria Martinez


The Ifo Institute has cut its growth forecast for Germany in 2021 by 0.8 percentage point to 2.5%, as the economy didn't rebound as strongly as expected in the third quarter.

The Ifo downgraded its forecasts for 2021, but raised its growth forecast for 2022 by 0.8 percentage point to 5.1%. In 2023, growth will be 1.5%, the Ifo said.

"The economy is divided," the Ifo's head of forecasts Timo Wollmershaeuser said. Service providers are experiencing a strong recovery from the coronavirus. However, industrial output is shrinking due to supply bottlenecks for key intermediate products.

A sudden increase in global demand for consumer durables, electronic goods, and special medical products has pushed many manufacturers of industrial intermediate products needed to produce these goods to their capacity limits, Mr. Wollmershaeuser said.

By contrast, private consumer spending is benefiting from the easing of coronavirus restrictions, with additional support from a more favorable income and employment outlook thanks to progress with vaccinations, the Ifo said.

The number of unemployed is expected to decline further to 2.4 million next year and 2.3 million in 2023 from 2.6 million this year, bringing the unemployment rate down to 5.1% in 2022 and 4.9% in 2023 from 5.7% this year, the Ifo forecasts.

Prices are expected to rise by 3.0% this year, by 2.3% next year, and by 1.6% in 2023, according to the Ifo's estimates.

The deficit in Germany's national budget will likely reach 157.3 billion euros ($184.47 billion) this year and then fall to EUR52.1 billion next year. In 2023, the government budget should be balanced again, the Ifo said. "This forecast was made on the assumption that only the economic and fiscal policy measures currently adopted will be implemented," the institute said.

Germany's current account surplus will reach EUR218 billion this year, then rise to EUR220 billion in 2022, and reach EUR234 billion in 2023, the Ifo forecasts.


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(END) Dow Jones Newswires

September 22, 2021 04:15 ET (08:15 GMT)

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