Germany, the EU’s largest economy, expected to rebound strongly in 2021, but that was without counting shortages and the continuing health crisis that hampered growth, placing the country behind its European neighbors.
The country experienced a disappointing 2.7% increase in GDP last year, according to provisional figures released Friday by the National Statistics Office Destatis.
“The very high expectations placed at the start of 2021 in the German economy have only been partially met”, summarizes Fritzi Köhler-Geib, chief economist at the public bank KFW.
Initially optimistic, growth forecasts were continuously revised downwards by experts during the year.
At issue: “the increase in supply and material shortages”, “the fourth wave of Covid-19” and “a further strengthening of” health measures, commented economists from the Destatis institute at a conference Press.
The growth of 2021 is not “enough to catch up with the sharp decline recorded during the first wave of coronavirus” and the creation of added value has remained “below 2.1%” than its pre-pandemic level, they added.
During the nightmarish year 2020, the country had limited damage, compared to the rest of the EU, with a recession of “only” 4.9%.
Germany is doing less well this time than many of its neighbors, while the average expected growth in the EU is 5%, according to the latest projections from the European Commission, with soaring to 6.5% in France or 6.2% in Italy.
It is also a thorn in the plans of the coalition of Social Democratic Chancellor Olaf Scholz, which came to power in December with major projects to finance.
To the new wave of Covid-19 infections at the end of the year, now fueled by the Omicron variant, has been added the impact on the “made in Germany” of the supply problems of raw materials and components.
Long-lasting shortages
For sectors of activity, especially services, affected by the health crisis, “reserves are increasingly meager, profits are declining, investments are slowing,” said Economy Minister Robert Habeck on Thursday.
For industry, the engine of the national economy, the consequences of the global supply chain crisis seem to be lasting.
The automotive industry, a flagship industry, suffers particularly from the lack of semiconductors, essential elements for the construction of a vehicle. The sector received another dark year in 2021, with registrations down 10.1% from the historically low level of 2020.
No improvement is expected in the short term: “We must be clear: the semiconductor crisis is far from over,” recently confided Stefan Hartung, CEO of automotive supplier Bosch.
In 2021 and 2022, these shortages should result in a total loss of 100 billion euros for German industry, estimated Thursday the organization of the BDI sector.
“Despite full order books, the shortage of microchips, components and raw materials will continue to affect production for a long time,” said Chairman Siegfried Russwurm.
These shortages are fueling record inflation, also driven by soaring energy prices, which is slowing consumer sentiment, already damaged by the health crisis.
Need for investments
The situation is therefore delicate for the government of Olaf Scholz, allied with environmentalists and liberals. The poor economic situation might reduce the room for maneuver of the new coalition, which has set itself the objective of massive investments to modernize and green its economy.
Berlin nonetheless approved at the end of the year an extension of 60 billion euros to the 2021 budget, intended for additional investments, mainly in favor of the climate.
Between 2020 and 2021, the state’s public deficit has already fallen from 145.25 to 153.86 billion euros, according to Destatis.
The government is banking on a gradual improvement in the situation. “The situation in the industry has stabilized in recent months,” the Ministry of the Economy commented on Friday.
Germany should experience growth of 3.7% in 2022, according to forecasts from the IFO institute. “The outlook for 2022 is therefore not bad, given the high level of order books in the manufacturing industry,” says Jens-Oliver Niklash, expert for LBBW.
This article was published automatically. Sources: ats / awp / afp
