Government changes forecast: boom not until next year

Status: 10/27/2021 11:48 a.m.

Instead of 3.5 percent, the German economy is likely to grow by just 2.6 percent this year, according to the federal government in its autumn forecast. For the coming year, however, the outgoing Minister Altmaier expects a boom.

Delivery bottlenecks and the ongoing corona pandemic are proving to be an ever greater burden for the German economy. Instead of the growth rate of 3.5 percent expected in April, according to the economic forecast now presented by the federal government, it should only be 2.6 percent this year. “The growth this year will be less than we all imagined,” said the outgoing Minister of Economic Affairs Peter Altmaier in the ARD morning magazine.

The economy is burdened by “that many goods and goods cannot be delivered because there is a shortage of raw materials in certain areas”. The rise in energy prices also plays a role. The economy will only boom in the coming year, Altmaier predicted. The “expectation of all experts” and employees in his ministry is that growth will then be over four percent before the growth rate normalizes at 1.6 percent in 2023. Specifically, the federal government predicts growth of 4.1 percent for 2022.

Split location

The prerequisite for this is that supply chains are stabilized internationally. Among other things, Germany must contribute to the fact that currently missing microchips “are produced more and more” – “also in Europe”. “The new federal government has to spend money on this,” demanded the outgoing minister.

According to experts from the Ministry of Economic Affairs, the economic situation in Germany is divided into two parts: On the one hand, the mood among service providers has improved significantly over the past month due to the progress made in vaccination. “At the moment, private consumption is the driving force behind the economic recovery.” On the other hand, the manufacturing sector suffers from a historically unique shortage of intermediate goods. “That slows the industrial economy, especially in the third and fourth quarters of 2021”. The demand for German products on the world markets remains high. If the delivery bottlenecks gradually resolve, as expected, there will be significant catch-up effects in the next year.

Anke Plättner in conversation with Peter Altmaier, CDU, about the economic forecast

Morning magazine, October 27, 2021

Inflation rate is expected to decrease next year

The federal government also expects an improvement in the inflation rate. Inflation this year is likely to be 3.0 percent, but a decrease to 2.2 percent is to be expected in the coming year. In 2023, the inflation rate is likely to fall to 1.7 and thus again below the target of two percent targeted by the European Central Bank (ECB). According to Altmaier, the reasons for the recent sharp rise in prices are the delivery bottlenecks and the high energy prices. The Federal Government assumes that the inflation rate will already reach a significantly lower level again at the turn of the year 2021/22, as special factors such as the base effect of the temporary reduction in sales tax rates will then no longer apply in the second half of 2020.

The economic projections published every spring and autumn form the basis for the estimates of tax revenue in the “Tax Estimates” working group. When drawing up their budgets, the federal government, the federal states, the municipalities and the social security funds use the forecast macroeconomic benchmarks as a basis. The reports to the European Union within the framework of the Stability and Growth Pact are also created on the basis of the projections.

The federal government projects the economic development in the short and medium term as well as the production potential. These estimates are the basis for the calculation of the upper limit of the annual net borrowing according to the debt rule according to Articles 109 and 115 of the Basic Law.

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