Federal government expects more growth

The federal government has raised its economic forecast for this year significantly. In view of the strong export business of German companies, she is now predicting economic growth of 3.5 percent.

Despite increased lockdown and persistently high incidence rates, the federal government expects higher economic growth this year than before. In his spring projection presented in the morning, Federal Minister of Economics Peter Altmaier is now assuming an increase in gross domestic product (GDP) of 3.5 percent. In January he had estimated a mere 3.0 percent. An increase of 3.6 percent is expected for 2022. “We will have regained our old strengths by 2022 at the latest,” said Altmaier. “Our economy is strong, robust and ready for a new start.” Last year it fell by 4.9 percent because of the Corona crisis.

Export is the mainstay

Nevertheless, Germany lags behind the USA and most of its European neighbors. The US economy is likely to grow by 6.5 percent this year, while France, Italy and Spain each expect an increase of between five and six percent. The recovery in Germany is said to be supported primarily by exports. These are expected to grow by 9.2 percent in view of the rapid recovery in important sales markets such as the USA and China. As a result, the ministry expects higher investments. “Catch-up effects also play a role, as investments have been postponed because of the crisis,” it said. The construction boom is also likely to continue, “due to the low interest rate environment and high demand for housing”.

Export expectations at a ten-year high

The hopes for the export industry in particular are justified. German exporters are currently as optimistic as they were last in January 2011. The barometer for industry’s export expectations climbed by 0.8 to 24.6 points in April, according to a recent survey by the Munich Ifo Institute. “In many countries, industry is hardly affected by the pandemic,” said Ifo President Clemens Fuest. “The demand for German export goods will benefit significantly from this.” The upswing in the USA and China, the most important export customers, is providing a boost. According to the ifo data, the outlook has improved across almost all branches of industry. In the electrical industry, expectations are very optimistic. In mechanical engineering, too, the indicator rose to its highest value in more than a decade; the chemical industry is also on the upswing. “The only problem children are manufacturers of clothing and other vehicle construction,” it said. “You are expecting a decline in foreign sales.”

The domestic economy is only slowly gaining momentum

The gradual easing of the corona restrictions should also gradually give the domestic economy and private consumer spending a boost. After the difficult start to the year, the labor market is expected to gradually pick up. Nevertheless, there is likely to be a decrease in the number of people in employment by 60,000 in 2021. An increase in employment of 290,000 is to follow in 2022. Altmaier’s optimism about the economy is shared by Finance Minister Olaf Scholz. “The third corona wave is currently requiring all of us to make another great effort,” said the SPD candidate for chancellor. “Nevertheless, it is clear: things are slowly improving and the aid policy is working.” The council of experts for assessing macroeconomic developments, colloquially known as the “economic methods”, is significantly more pessimistic than the government. The committee had only revised its forecast downwards two weeks ago and is only expecting an increase in gross domestic product of 3.1 percent for 2021. In the autumn, the economic wise men had assumed 3.7 percent.