German economy may shrink in Q4 2021 due to COVID: Bundesbank

The German economy will witness a setback in the last quarter (Q4) of 2021 and the first quarter (Q1) of 2022 due to the pandemic, but is set to pick up significant momentum again in spring of next year, according to the Deutsche Bundesbank (German federal bank), which projected that gross domestic product will rise by 2.5 per cent this year—less strongly than anticipated in June.

Over the next two years, calendar-adjusted economic growth will then rebound to 4.2 per cent and 3.2 per cent respectively, according to these projections.

“The upswing has been slightly delayed,” said Bundesbank president Jens Weidmann at a presentation of the institution’s current projections.

The German economy will witness a setback in 2021 last quarter and the first quarter of 2022 due to the pandemic, but is set to pick up significant momentum again in next spring, according to the Deutsche Bundesbank (German federal bank), which projected that gross domestic product will rise by 2.5 per cent this year—less strongly than anticipated in June.

Private consumption is expected to rise substantially from spring onwards, with the assumption that pandemic-induced restrictions will largely have fallen away by then, Bundesbank said in a press release.

Additional spending of household savings accumulated during the pandemic is likely, in part.

The bank’s projections for the inflation rate are consistently markedly higher than June expectations. An inflation rate of 3.2 per cent as measured by the harmonised index of consumer prices is expected for this year, attributable not only to one-off effects that have been on the radar for some time, but also to the expiry of the reduction in value-added tax rates and the introduction of carbon emission certificates.

The inflation rate will only fall significantly if these influences diminish in 2023, according to the bank’s experts. At 2.2 per cent in 2023 and 2024, too, however, it will still remain relatively high, not only on account of strongly rising wages and the favourable economic situation, but also due to the costs associated with the transition to a climate-neutral economy.

Fibre2Fashion News Desk (DS)