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Epidemics

Germany's Economic Growth Slows Amid Covid-19 Restrictions

Strategic Insights

— 2 min read

Germany's economic growth is expected to slow in the near term due to increasing Covid-19 infections and supply chain problems, according to the German Council of Economic Experts. The council has cut its growth forecast for this year from 3.1 to 2.7 per cent, citing supply-side bottlenecks as a major factor. Despite this, the council raised its prediction for growth next year from 4 to 4.6 per cent, which would give Germany one of the slowest 2021 growth rates in the eurozone. The country's economic recovery remains intact, but it will be delayed until supply chain problems are resolved.

Key Takeaways:

  • The German Council of Economic Experts has cut its growth forecast for this year from 3.1 to 2.7 per cent, citing supply-side bottlenecks as a major factor.
  • The council raised its prediction for growth next year from 4 to 4.6 per cent, which would give Germany one of the slowest 2021 growth rates in the eurozone.
  • The country's economic recovery remains intact, but it will be delayed until supply chain problems are resolved.
  • The council forecast the German economy would grow 0.4 per cent in the fourth quarter, down from 1.8 per cent in the third quarter.
  • The European Central Bank forecast overall eurozone output to be 4 per cent higher this year, while Germany's economy is expected to take longer to return to pre-pandemic levels.
  • The German economy declined less than most eurozone countries last year, but it is expected to take longer to recover.

Statistics:

  • 2.7 per cent: German Council of Economic Experts' revised growth forecast for this year.
  • 4.6 per cent: German Council of Economic Experts' growth forecast for next year.
  • 32.2 per 100,000 people: Covid-19 infection rate in Germany (seven-day average).
  • 40,000: Daily Covid-19 cases reported in Germany (yesterday).
  • 3.1 per cent: German Council of Economic Experts' previous growth forecast for this year.
  • 4.0 per cent: European Central Bank's forecast for overall eurozone output this year.

Sources:

  • "Germany is increasingly looking like the laggard of the euro area," said Holger Schmieding, chief economist at Berenberg.
  • "The government must remove all the restrictions on growth imposed during the pandemic, by successfully stepping up the vaccination campaign," the BDI, Germany's main business lobby.
  • "The authorities must do all in their power to ensure that the vaccination numbers rise again," said BDI.
  • "We cannot allow a small group of anti-vaxxers to paralyse society as a whole," said BDI.
  • "I think it is a bit under-appreciated that the services sector might struggle into the fourth quarter because if you look at the Google Mobility data, there are already signs that higher Covid infections are causing a slowdown in consumer services," said Oliver Rakau, economist at Oxford Economics.

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