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Germany’s Ifo institute cuts 2021 GDP growth forecast to 2.5% - Financial Markets Worldwide

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ReutersEconomy17 minutes ago (Sep 22, 2021 04:16AM ET)

© Reuters. FILE PHOTO: : Staff wear protective masks at the Volkswagen assembly line in Wolfsburg, Germany, April 27, 2020. Swen Pfoertner/Pool via REUTERS/File Photo

BERLIN (Reuters) – Germany’s Ifo economic institute said on Wednesday it cut its growth forecast for Europe’s largest economy for this year as supply chain disruptions and scarcity of intermediate goods are slowing down the recovery from the COVID-19 pandemic.

The Ifo institute now sees Germany’s gross domestic product (GDP) to grow 2.5% this year, down 0.8% percentage points from its previous forecast, and 5.1% next year, up 0.8% points.

“The strong recovery from the coronavirus crisis, originally expected for the summer, is further postponed,” Ifo chief economist Timo Wollmershaeuser said.

“Industrial production is currently shrinking as a result of supply bottlenecks for important intermediate goods. At the same time, service providers are recovering strongly from the coronavirus crisis,” Wollmershaeuser added.

In a separate forecast, Germany’s association of private sector banks (BdB) gave a more optimistic outlook for growth in 2021. It expects GDP growth of 3.3% this year and 4.6% next year.

“The biggest risks causing uncertainty for the outlook are the increased number of coronavirus infections and significant delivery and production bottlenecks which are particularly affecting German industry,” the BdB said.

At the same time, strong demand from abroad and robust private consumption at home are expected to drive the recovery this year and next.

“We expect private consumption to increase by 7% in 2022. That would be by far the strongest boom since reunification,” BdB managing director Christian Ossig said.

The problem of “compulsory saving” caused by coronavirus restrictions seems to be a thing of the past, with the catch-up effects continuing well into next year, Ossig added.

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