ifo Institute Lowers Growth Forecast for Germany in 2022 by 1.4 Percentage Points to 3.7 Percent

GDP is expected to contract by 0.5 percent in this quarter compared to the previous quarter and then stagnate at the beginning of 2022. “In the summer half-year of 2022, a strong recovery will set in as the coronavirus wave subsides and the supply bottlenecks gradually end,” Wollmershäuser says. Overall economic production is likely to increase significantly in the second and third quarters of 2022, by 2.3 percent and 1.8 percent respectively, and then slowly move toward average growth rates.

The inflation rate should initially rise again from 3.1 percent this year to 3.3 percent next year. The cost increases associated with supply bottlenecks will play a driving role here, as will a delayed adjustment to higher energy and commodity prices. Consumer price increases are not expected to return to normal until 2023, at which point they should fall back to 1.8 percent.

The unemployment rate will decline from a projected 5.7 percent in 2021 to an average of 5.2 percent in 2022 and 4.9 percent in 2023. The number of people in employment is therefore expected to increase by around 409,000 in 2022 and by 311,000 in 2023, having been 97,000 higher on average in 2021 than in the previous year. Short-time work is expected to fall from an estimated average of just under 1.7 million employees this year to about 313,000 next year and 74,000 in 2023. 

In the current year, the government budget deficit is expected to be EUR 162 billion. The government budget ought to recover over the rest of the forecast period. In 2022 and 2023, deficits of a good EUR 80 billion and EUR 20 billion respectively are expected.