Monday, January 25, 2021
Federal government lowers GDP forecast
The way to the pre-crisis level will probably be longer
The German economy will not have reached its pre-crisis level until the middle of next year. The federal government is apparently assuming this. In view of the lockdown, the economy will recover more slowly.
According to the Federal Government, the German economy will return to pre-crisis levels in mid-2022. This emerges from a draft of the annual economic report. Federal Minister of Economics Peter Altmaier wants to introduce him on Wednesday in Berlin. "The expected recovery of the global economy, the underutilization of production capacities, but also the leading indicators speak in favor of a continuation of the catching-up process," says the document.
A concrete forecast for growth is not yet included in the draft. However, the government has received the growth forecast of 4.4 percent and is now expecting only an increase of 3.0 percent. The ongoing lockdown is likely to play a role here. In 2020, the German economy collapsed by 5.0 percent due to the massive restrictions in the wake of the coronavirus pandemic.
"Further economic development will continue to be significantly influenced by the course of the pandemic and by the measures taken to contain it," says the draft. The federal government has switched to an expansive financial policy because of the corona crisis. It calculates new debt of around seven percent of the gross domestic product in 2021.
The debt ratio, which is still relatively low by international standards, is likely to climb a few points to 72.5 percent of economic output. "In the following years, the debt ratio will in all likelihood decline continuously. The recovering economic development, the return to lower new borrowing and the persistently low interest rates should contribute to this expected decline."
In 2024, the government is assuming a debt ratio of 68.75 percent. In 2019, for the first time since 2002, Germany pushed the debt ratio back to just below the 60 percent mark, which is actually the upper limit in the EU, but which many countries have not complied with for a long time.
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