“Strong upswing” expected: Bundesbank raises economic forecast

“Strong upswing” expected
Bundesbank raises economic forecast

The corona numbers are falling, the mood is rising: The Deutsche Bundesbank is now expecting higher economic growth than a few months ago. But the new conditions also bring less good news for consumers.

In view of the gradual reopening of the economy, the Bundesbank has significantly increased its economic forecast for Germany for this year and next year. “The Deutsche Bundesbank sees the German economy at the beginning of a strong upswing,” it said in its semi-annual forecast. For 2021, a calendar-adjusted increase in gross domestic product (GDP) of 3.7 percent is now expected instead of the previous 3.0 percent. Growth of 5.2 percent (December forecast: 4.5) is forecast for 2022 and 1.7 (1.8) percent for 2023.

“The German economy is overcoming the pandemic-related crisis,” said Bundesbank President Jens Weidmann. The forecasts assume that the corona pandemic will be pushed back quickly and sustainably by the vaccination campaign and that protective measures will be quickly relaxed. Above all in the service sectors, which were previously particularly affected, and in private consumption, this is creating strong catch-up effects. “This summer economic output could reach the pre-crisis level again,” said Weidmann.

The Bundesbank now expects an inflation rate of 2.6 percent for the current year instead of 1.8 percent as before. The cost of living is expected to increase by 1.8 (1.3) percent next year and 1.7 (1.6) percent in 2023. According to the Bundesbank, the price development in the current year is characterized by the again higher VAT rates, the newly introduced CO2 emission certificates and the sharp rise in prices for crude oil and also for food. “At the end of the year, inflation rates of around 4 percent are temporarily possible,” said Weidmann. However, the special effects expired in the coming year.

Last year, the corona pandemic plunged the German economy into the deepest recession since the global financial crisis in 2009. According to the latest calculation by the Federal Statistical Office, the gross domestic product collapsed by 4.8 percent in 2020.