Limited By The Second Wave, Germany Lowered Its Growth Forecast To 3% In 2021

2021-01-27   |   by CusiGO

The impact of Germany’s second detention on its economy is much greater than the government predicted last fall. Economy Minister Peter altmaier announced on Wednesday that he expects GDP growth to be 3% in 2021, up from 4.4% a few months ago. The responsibility lies in Germany’s almost complete closure of public life in early November in response to the second wave of coronavirus.

The hotel, leisure, culture and sports departments were subsequently closed. In December, all non core trade increased. Chancellor Angela Merkel and state leaders agreed to extend the restrictions until February 14 next year.

Altmaier described the dual image of the German economy: “although industry is still strong, the service industry has been seriously affected,” he introduced his department’s annual report at a news conference. In 2020, the epidemic caused GDP to fall by 5%, which altmair called “dramatic”. This is the biggest setback since the 2008 and 2009 crises.

But the minister hopes to give a better impression in the near future: “it’s encouraging that we see the number of infections stabilizing every day,” he said, but he quickly warned that the situation is complicated by the dangers posed by new, more infectious variants of the virus. Altmaier is not in favor of easing containment measures, which is demanded by more and more people for the sake of economic recovery. “We should not waste what we have achieved so far,” he pointed out.

“There will be an economic recovery in 2021, but the momentum will weaken,” altmeyer said in the report, assuming that he did not expect the economy to regain its strong momentum before the coronavirus crisis until mid-2022. In October, the administration hopes to return to the status quo by the end of 2021 or early 2022. The new growth forecast is lower than the International Monetary Fund’s 3.5% forecast for 2021.

According to the government’s forecast, Germany’s growth is almost entirely driven by domestic demand, while the external sector accounts for only one tenth of GDP. According to the report adopted by the Council of ministers, exports will grow by 6.4% and imports by 7.2%. “Employment is expected to stagnate in 2021,” the ILO added, acknowledging that “economic development will continue to be seriously affected by the epidemic process and containment measures.” The executive stressed that the financial assistance in 2020 “ensured millions of jobs, and businesses gained vital liquidity.”.

Due to the outbreak of the epidemic in Germany for one year, the process of economic recovery is slower than expected. A survey of more than 10000 companies by the German Chamber of Commerce and industry (DIHK) a few days ago confirmed this. The Ifo index, a measure of German business confidence, also fell sharply on Monday, the biggest drop in the past six months. The Ifo institute points out that due to the extension of the second wave, enterprises think that the current situation is worse than last month, and their expectations are more pessimistic, which, to some extent, has once again hindered the German economy. Only the confidence of the industrial sector and export companies has improved.