It should be a «V» curve: a deep corona-related fall is followed by a sustained steep ascent. It turned out differently. The curve has flattened out.
The federal government does not expect a strong economic upturn in Germany until next year. The acting Federal Minister of Economics Peter Altmaier (CDU) spoke on Wednesday in Berlin of a “cool autumn wind”.
Delivery bottlenecks for important products such as microchips slowed the economy. The increasing numbers of new corona infections could also pose a threat to further development.
The federal government lowered its growth expectations for 2021. She expects the gross domestic product to increase by 2.6 percent – in April an increase of 3.5 percent had been predicted. Previously, leading economic research institutes had also lowered their forecasts.
Last year, economic output slumped by 4.9 percent as a result of the pandemic. Altmaier said that it was possible to maintain the substance of the German economy. He referred to billions in government aid for companies. Germany is back on the growth path after the Corona crisis. This year, however, in view of the current delivery bottlenecks and high energy prices around the world, the hoped-for “final spurt” will not come.
Headwind expected for next year
According to the forecast, the economy will pick up significantly in the coming year. For 2022, the federal government is now expecting growth of 4.1 percent instead of the previous 3.6 percent. An increase of 1.6 percent is expected in 2023. Altmaier said that by the end of the first quarter of 2022, the German economy will have reached the level of performance it had before the Corona crisis – a quarter later than originally assumed.
However, there are risks. Germany is facing a second winter pandemic, said Altmaier. It is possible that the high numbers of infections mean that there are negative effects on the economy, even if a lockdown does not have to be imposed.
The question is also when will the supply bottlenecks, which are currently slowing the economic catch-up, resolve. Altmaier spoke of a historically unique shortage of intermediate goods. The demand for German products on the world markets remains high: “If the delivery bottlenecks gradually resolve, there will be a clear catch-up effect in 2022.”
Further material shortage
The order books of many companies are actually well filled at the moment. In the absence of intermediate goods in many places, production will probably have to be reduced further in the fourth quarter, said Simon Junker, economic expert at the German Institute for Economic Research. The institute spoke of a winter lull. Altmaier reaffirmed the goal of expanding production in Germany for important products such as microchips.
Increased energy prices are also causing problems for companies and consumers. The Ministry of Economic Affairs assumes that energy prices will consolidate and, in some cases, will also decrease, as Altmaier said. With gas there is security of supply in winter. The minister again spoke out in favor of relieving the citizens of electricity prices. The new government has to decide this.
Altmaier gave a slight all-clear regarding inflation. The government expects the inflation rate to reach a significantly lower level again by the turn of the year 2021/22 – because special factors will then no longer apply, such as the withdrawal of the temporary VAT cut in the second half of 2020. This is now fully reflected in inflation. The regular VAT rates have been in effect again since January. So goods and services tend to become more expensive.
In its autumn projection, the federal government expects inflation rates of 3.0 percent in 2021 and 2.2 percent in 2022. In September, the inflation rate, fueled above all by higher energy costs, was 4.1 percent.
Appeals to the new coalition
In view of the lowered autumn forecast, leading business associations appealed to the possible new coalition of the SPD, Greens and FDP to relieve companies. The managing director of the Federation of German Industries, Joachim Lang, said: “The stuttering economic engine must be a wake-up call for the coalition negotiations.”
The current economic situation also has consequences for consumers. “The high energy prices reduce the real disposable income of households, which temporarily dampens consumption,” said Sebastian Dullien, scientific director of the Institute for Macroeconomics and Business Cycle Research at the union-affiliated Hans Böckler Foundation. The increasing dynamic of Covid infection is likely to lead to reluctance on the part of consumers over the winter, for example in the catering and leisure industries; there could also be renewed restrictions.
The delivery bottlenecks are also noticeable among consumers. You would have to wait longer for goods, said Altmaier. He himself felt that too. The minister is leaving office with the formation of a new government and wants to buy a new car privately, as he says – but he discovered that it was difficult to get a delivery date at all.
Jane Stock is a technology author, who has written for 24 Hours World. She writes about the latest in technology news and trends, and is always on the lookout for new and innovative ways to improve his audience’s experience.
