Germany’s central bank revised its growth forecasts for 2022 on Friday amid constricted supply chains and the spread of the omicron variant.
The Bundesbank lowered its expected growth rate to 4.2%, down from the 5.2% it had forecast in June.
“The recovery has been somewhat pushed back,” Bundesbank President Jens Weidmann said.
This is not the first time that the bank has had to bring down its estimates. Its economists are now expecting GDP growth in 2021 to reach 2.5%, but their earlier prognosis had been 3.7% — most countries are expecting to log higher growth figures than usual at present given the negative impact of the COVID pandemic on world economies in 2020 and 2021.
Delayed pandemic recovery
The Bundesbank is more optimistic than other research institutes about the fortunes of Europe’s biggest economy.
The expected growth in 2022 is based on predictions of an uptick in consumer spending.
“Consumers will spend more of their available income for a while than they did before the pandemic,” Weidmann said.
The bank also expected that production supply bottlenecks would be resolved by the end of 2022, providing a temporary boost for exports.
Many of the gains anticipated for 2022 have thus been pushed back to 2023, with predicted growth of 1.7% now increased to 3.2% for that year.
In 2024, the rate is expected to come back down to 0.9%.
Rising costs driving inflation
Inflation is expected to reach 3.6% by the end of this year, measured in line with the harmonized consumer price index provided by the European Central Bank.
The German central bank pointed to the rising costs of raw materials and energy as the main culprit here.
Companies are also expected to pass on the costs arising from bottlenecks to their customers.
But the bank expected inflation to fall in 2023, albeit to around 2.2%, a relatively high level still, for the following two years.
ab/msh (dpa, AFP, Reuters)
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