Stalling growth creates headache for next German government

Stalling growth creates headache for next German government

FRANKFURT: Global supply chain bottlenecks forced the German government to downgrade its 2021 growth forecast yesterday as it prepares to hand over the reins of a spluttering economy to the country’s next coalition. Supply chain disruptions and shortages of raw materials, including plastics, metals and paper, have choked off the recovery from the impact of the coronavirus pandemic in Europe’s top economy.

As a result, the government yesterday lowered its forecast for economic growth to 2.6 percent this year from 3.5 percent previously. “Bottlenecks and high energy prices are both equally slowing the progress of the economy in Europe and worldwide,” German Economy Minister Peter Altmaier said in a press conference.

The economic recovery is expected to be pushed into next year, with the government forecasting growth of 4.1 percent, up from its previous estimate of 3.6 percent. In 2023, growth would then fall back to 1.6 percent. A scarcity of components has had a particularly hard impact on the country’s manufacturing-driven economy, with production lines grinding to a halt in Germany’s important automotive sector.

Rapid growth in 2022 would depend on “how quickly chipmakers can increase production of semiconductors”, Altmaier said, noting that demand for the components would continue to be strong.