BERLIN (Reuters) – The German economy will grow 3.3% weaker than expected this year as supply bottlenecks in the manufacturing sector hold back industrial production, the Ifo economic institute forecast on Wednesday.
The slower growth forecast for Europe’s largest economy represented a 0.4 percentage point cut compared to its previous estimate in March, Ifo said.
By 2022, the institute raised its GDP growth forecast to 4.3% from the previous 3.2%.
“In the short term, bottlenecks in the delivery of primary products in particular are holding the economy back,” said Ifo economist Timo Wollmershaeuser.
“The recovery, which is strong in itself due to the reopening of the economy, is lagging a bit more than we expected in the spring.”
Germany’s Daimler (OTC 🙂 and Volkswagen (DE 🙂 said on Tuesday they are cutting working hours at some of their plants as automakers continue to suffer from a semiconductor shortage.
The recovery from the COVID-19 pandemic and bottlenecks in the supply of chips, wood and other materials are driving prices up, leading Ifo to forecast that inflation will rise to 2.6% this year from 0.6%. in 2020 before falling back to 1.9% in 2022.
The strong rebound is likely to boost domestic demand and with it imports, which are expected to exceed exports in 2021 and 2022.
This will help reduce Germany’s large current account surplus to 5.8% of economic output in 2021 and 4.9% in 2022, bringing it below the European Union’s indicative threshold of 6% for the first time in many years, the institute said.
Ifo’s growth forecast is less optimistic than the Bundesbank estimates, which forecast 3.7% for this year and 5.2% next.
Unlike the Bundesbank, the Ifo institute expects household spending to be less favorable, as many consumers are unlikely to spend all the savings they accumulated during the closures, Wollmershaeuser said.
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