Anticipated Economic Expansion Projected at 3.1% in 2021
In the aftermath of the COVID-19 pandemic, Germany's economic growth forecasts for 2021 and 2022 indicate a recovery from the pandemic's impact. However, the growth is moderate and subject to various factors such as vaccinations and inflation.
In 2021, Germany experienced a rebound as restrictions eased and vaccinations progressed, but growth rates were still restrained by ongoing global supply chain disruptions and inflationary pressures. According to official GDP growth data, Germany's economy grew around 2.9% in 2021, reflecting recovery momentum from pandemic lows.
The impact of COVID-19 was significant initially, causing a contraction in 2020. However, by 2021, vaccine rollouts improved consumer confidence and economic activity, especially in the services sector, which makes up about 62.6% of GDP.
Industrial production is also recovering in Germany.
In 2022, growth slowed down due to rising inflation, energy price shocks related to geopolitical tensions, and persistent supply chain issues, leading to a more cautious forecast generally in the range of 1.5% to 2.0%.
The Expert Council for the Assessment of Overall Economic Development expects economic growth in Germany to be 3.1% in 2021. For the year 2022, the Expert Council expects growth of 4.0% (calendar-adjusted 4.1%). The Expert Council has lowered its growth forecast for the euro area this year to 4.1%.
The Expert Council identifies the course of the corona pandemic as the greatest risk. A decline in economic output in Germany of about 2% is expected in the first quarter of 2021 due to the increase in infection numbers in the fall of 2020 and current ongoing restrictions.
Inflation rates in early 2022 were around 2.1%, according to the Expert Council. For the year 2022, the Expert Council forecasts an increase in consumer prices of 1.9%. In 2022, high inflation, driven by energy prices and supply interruptions, squeezed household purchasing power and raised costs for businesses, dampening growth prospects.
To summarize:
| Year | GDP Growth Forecast / Actual | Key Influences | |-------|-----------------------------|-----------------------------------------------------------------------------------| | 2021 | Approx. 2.9% | Recovery from COVID-19 recession; vaccine rollout boosting services & consumption.| | 2022 | Around 1.5% - 2.0% | Inflation surge, energy price increases, supply chain issues slowed growth. |
The rebound in 2021 was stronger due to vaccinations enabling reopening, but inflation in 2022 and geopolitical factors limited growth. Growth forecasts beyond 2022 expect modest improvement with government stimulus and easing conflicts, but demographic challenges and external shocks remain concerns.
Economic and social policy must address the ongoing challenges in financing business growth due to escalating inflation and supply chain disruptions, as these factors have significantly affected Germany's recovery from the COVID-19 pandemic. Financial institutions should be encouraged to provide support for businesses facing increased costs and reduced demand caused by high consumer prices and geopolitical tensions.
