Inflation remains high
Federal government lowers growth expectations
01/21/2022, 06:38 p.m
The Federal Government estimates that the economic recovery this year will be weaker than previously assumed. The new cabinet cannot keep up with the forecast of the previous government. There is no all-clear on the subject of inflation either.
The federal government will significantly lower its growth forecast for the German economy next week. An increase of only 3.6 percent is then expected for this year, according to the draft of the annual economic report. He is to be adopted in the cabinet next Wednesday. In the fall, the previous government still expected growth of 4.1 percent for this year.
According to the Federal Government, the recent surge in inflation will not fall in 2022. On average, it should be 3.3 percent – after 3.1 percent last year. A higher annual rate was last determined almost 30 years ago – in 1993 with 4.5 percent at that time.
Experts had long assumed that inflation would only be temporarily high and referred to special factors. However, it seems to be proving to be more and more stubborn, which is sapping the purchasing power of consumers. The federal government still estimates core inflation at 2.5 percent for 2022, excluding increases in food and energy prices. Both factors were recently decisive for the high increases. “The federal government keeps an eye on the development of the inflation rate and the key price-driving factors on the energy markets and due to the supply chain disruptions.”
Economics Minister Robert Habeck will explain the forecasts in the Bundestag next week. He will make a government statement on Friday. According to economists, the supply chain problems and the ongoing corona restrictions are slowing down many companies – there are even fears of a recession at the turn of the year. Forecasts for 2023 are not included in the annual economic report.
The German economy grew by 2.7 percent last year. This could not compensate for the 4.6 percent slump in the first year of the Corona crisis, 2020. According to economists, the pre-crisis level will not be reached again until spring.
The federal government expects a weak start to the year in 2022. The situation should improve over the course of the year if the corona restrictions are lifted and the supply chains function better again. Private consumption will be the growth driver.