German ministry trims growth forecasts
By Abigail Townsend
Date: Wednesday 26 Jan 2022
(Sharecast News) - The German government cut its economic growth forecast on Wednesday, after restrictions introduced to curb the spread of Omicron weighed heavily.
The economy ministry said the start of the year would "still be subdued due to the coronavirus pandemic, especially in the service sectors". It now expects the economy to grow by 3.6% in 2022, down from its earlier guidance for growth of 4.1%.
In contrast, the Bundesbank central bank has forecast 4.2% growth for 2022.
Germany's gross GDP was 2.7% in 2021.
However, the ministry said it expects the economy to pick up again as the infection rates ease in the spring, which will allow the authorities to lift restrictions on hospitality and retail.
It added: "Industry should also be able to expand its production noticeably again as soon as the supply bottlenecks gradually resolve over the course of the year."
Germany's export-focused economy, Europe's largest, is dominated by the manufacturing sector, especially the car industry, and has been hit hard by raw material shortages, especially of semiconductors.
As well as trimming its forecast for GDP, the ministry said inflation was likely to continue rising in 2022, fuelled by higher energy costs and the chip shortage. Wage growth was likely to be "somewhat stronger". It now expects inflation to be 3.3% in 2022, compared to 3.1% in 2021.
The ministry noted: "The federal government is closely monitoring the development of the inflation rate and the key factors driving prices, especially those linked to energy markets and supply chain disruptions."
Economy minister Robert Habeck told fellow politicians on Wednesday that the economy was currently in an "opaque phase", with some sectors enjoying full order books but others having "considerable problems".
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