The German government has downgraded its economic growth forecast for 2021 to 2.6% but lifted the estimate for the upcoming year to 4.1% as supply problems are delaying recovery.
- The revised government forecast for gross domestic product growth compares with an April forecast for the economy to expand by 3.5% in 2021 and 3.6% next year.
- For 2023, Europe’s largest economy expects economic growth to return to pre-pandemic levels with an expansion rate of 1.6%.
- The scarcity of semiconductors and other intermediate goods, triggered by supply chain bottlenecks, is hampering German manufacturing output levels.
- Alongside supply problems with electronic components, companies are grappling to meet high demand due to shortages of raw materials.
- The widespread supply chain problems in production are causing price increases and this is the reason why the government expects consumer price inflation to rise to 2.9% this year.
Meanwhile, the government is sticking to its evaluation that the price surge would be temporary and projects inflation cooling down to 2.2% in 2022 and 1.7% in 2023.
DAX up +1.05%, EURUSD up +0.02%