ifo Institute Cuts Growth Forecast for Germany in 2021 by 0.8 Percentage Points to 2.5 Percent

“A sudden increase in global demand for consumer durables, electronic goods, and special medical products has pushed many manufacturers of the industrial intermediate products needed to produce these goods to their capacity limits. In addition, global supply chains have been faced with enormous logistical challenges as a result of the greatly changed flow of goods,” Wollmershäuser adds.

By contrast, private consumer spending is benefiting from the easing of the coronavirus crisis, with additional support from a more favorable income and employment outlook thanks to progress with vaccinations. For example, employment growth among service providers accelerated sharply in the second quarter and unemployment fell significantly. Short-time work was also noticeably reduced and will return to its pre-crisis level in the coming year.

The number of unemployed ought to decline further from 2.6 million this year to 2.4 million next year and 2.3 million in 2023, bringing the unemployment rate down from 5.7 percent this year to 5.1 percent and 4.9 percent. Prices are expected to rise by 3.0 percent this year, then by 2.3 percent the next, and finally by just 1.6 percent in 2023.
The deficit in Germany’s national budget (federal, state, local, social security) will likely reach EUR 157.3 billion this year and then shrink to EUR 52.1 billion next year. In 2023, the government budget should finally be balanced once again. This forecast was made on the assumption that only the economic and fiscal policy measures currently adopted will be implemented. 

Germany’s current account surplus, much criticized internationally, will reach EUR 218 billion this year, then rise to EUR 220 billion, finally reaching EUR 234 billion in 2023. This corresponds first to 6.2 percent, then 5.9 percent, and finally 6.1 percent of economic output.