With 2.7 percent growth, the German economy has bounced back in 2021 after the Corona low. However, the increase in gross domestic product (GDP) reported by the Federal Statistical Office on Friday on the basis of initial figures was lower than long hoped for.
In addition, economic output in most economic sectors has not yet returned to pre-crisis levels. In 2020, GDP in Germany had slumped by 4.6 percent as a result of the pandemic, according to the latest data.
Supply and material bottlenecks dampened the recovery, which was halted at the end of the year by the fourth Corona wave and renewed tightening of containment measures. According to an initial estimate by the Wiesbaden-based agency, economic output contracted in the fourth quarter of 2021 compared with the previous quarter.
Economic research institutes had revised their forecasts for this year downward in recent weeks. Economists now believe that the economy will not really pick up again until spring 2022.
According to the latest forecasts, the German economy is still likely to grow by between 3.5 percent and a good 4 percent in the current year, despite a somewhat gloomier outlook. This would be on a par with the years following the deep recession in 2009 as a result of the global financial and economic crisis.
According to economists, the main driver will be private consumption. Many households are sitting on high savings balances because, for example, trips had to be canceled due to the pandemic and leisure activities were temporarily restricted.
Economists also expect companies to start investing more again in the spring, when there is less uncertainty about the further course of the Corona pandemic. By contrast, exports, another key driver of the German economy, are likely to continue to suffer from logistics problems and supply bottlenecks for raw materials and intermediate products in the coming months.
The burdens of the crisis will continue to affect Germany for some time to come. According to provisional calculations by the Federal Statistical Office, the German government again spent significantly more money than it took in during the second year of the pandemic.
In relation to total economic output, the deficit of the federal, state, and local governments and social security funds was 4.3 percent in 2021. The deficit amounted to 153.86 billion euros. In absolute terms, this was the second-highest deficit since reunification. In 2020, Germany had also recorded a budget deficit of 4.3 percent, the first since 2011.
Germany is not threatened with trouble from Brussels because of this. Because of the Corona crisis, the EU states had for the first time suspended the rules of the Stability and Growth Pact, according to which the budget deficit may not exceed three percent and total debt may not rise above 60 percent of gross domestic product. The pact is scheduled to take effect again in 2023. In order to cushion the economic consequences of the pandemic, the EU states had to take on enormous debts.
Image by Gerd Altmann