The leading economic research institutes expect a strong upswing. Initially, this is expected to be driven primarily by private consumption.
According to economic researchers, the German economy is on the verge of a strong upswing. After the deep Corona recession in 2020 and the renewed full braking at the beginning of 2021, however, the economic engine is unlikely to start with the "boom" hoped for by Vice Chancellor Olaf Scholz – but rather ignite in two stages, as several research institutes reported in their latest forecasts on Thursday.
Private consumption is the only mainstay of growth for the time being. In industry, things are not likely to run smoothly until the second half of the year due to the considerable disruptions in global supply chains: Although the manufacturing sector is sitting on bulging order books, it is often unable to process orders due to supply bottlenecks for raw materials and intermediate products.
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"For the time being, however, the recovery will be delayed in the industrial sector. The strong global recovery has brought with it multi-layered supply bottlenecks that are noticeably hampering the production of many companies," says the I. Despite the very good order situation, production in the manufacturing sector "will therefore probably only gradually return to its recovery course in the second half of the year.". In addition, according to Ulrich Kater, Dekabank’s chief economist, demand is increasingly coming up against limits to its capacities, which are likely to have shrunk during the pandemic.
A late "spring awakening
Overall, however, the expectations of economic researchers are thoroughly positive: "German economy with late spring awakening," says the Berlin DIW. The head of the Kiel Institute for the World Economy (I), Stefan Kooths, says: "The German economic boiler is under steam." Or: "The economy in Germany is picking up again in the wake of the easing of infection control measures," according to the head of economic research at the Essen-based RWI, Torsten Schmidt.
In 2020, the world’s number four economy slumped by 4.8 percent under the impact of the corona pandemic. The I now expects economic growth of 3.9 percent for 2021 (March forecast: 3.7). The DIW believes that Europe’s largest economy will grow by 3.2 (previously 3.0) percent – and the RWI has raised its expectations to 3.7 (3.6) percent.
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Only the Munich-based Ifo Institute had reduced its forecast to 3.3 (3.7) percent the previous day – focusing on the braking effects of supply bottlenecks. For 2022, all researchers are predicting significantly stronger growth in gross domestic product (GDP): Predictions range from 4.3 percent (Ifo and DIW) to 4.7 (RWI) or 4.8 percent (I). According to forecasts, the German labor market, which was booming before Corona, should return to the pre-crisis level of 2019 in terms of employment and unemployment figures.
Money is rolling in
In the case of private households, the repeatedly necessary lockdowns with closures of retail outlets, gyms or cinemas, for example, have led to a huge consumption backlog, resulting in unprecedented savings: "Compared to a scenario in which the savings rate would have remained at its pre-crisis level, according to our forecast the combined accumulated purchasing power last year and this year amounts to around 200 billion euros or. 10 percent of disposable income (in 2019)," write the I economic researchers. Government support – for example, the reduction in value-added tax in the second half of 2020, as well as monetary social benefits such as short-time working allowances – would also have piled up to date to a large extent.
With the gradual relaxation of the Corona measures, public life is now awakening – and the money withheld from households is rolling in on merchants, service providers and restaurateurs. The I expects this to boost private consumer spending by 2.4 percent in 2021 and by as much as 8.2 percent in 2022 – with one uncertainty factor: "It remains an open question how much of the purchasing power that has built up in the meantime will be spent on additional private consumer spending."
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Moreover, it’s far from a foregone conclusion whether the Corona situation will ease further. Any forecasts would be "on shaky ground as long as the Corona pandemic is not sustainably contained," the DIW emphasized. "Only when the vaccination rate is so high that at least herd immunity is approximately achieved will we experience a sustained upswing." (dpa)