BERLIN (Reuters) – Persistent supply bottlenecks and a fourth wave of coronavirus infections in Germany are further delaying the recovery of Europe’s largest economy from the pandemic, the Ifo institute said on Tuesday as it slashed its growth forecast for next year.
Ifo expects the German economy to shrink by 0.5% quarter-on-quarter in the final three months of this year and to stagnate in the first three months of next year.
For 2022 as a whole, Ifo slashed its economic growth forecast to 3.7% from 5.1% projected in September. For 2023, it lifted its GDP growth forecast to 2.9% from 1.5% previously.
“The ongoing delivery bottlenecks and the fourth coronavirus wave are noticeably slowing down the German economy,” Ifo chief economist Timo Wollmershaeuser said.
“The strong recovery initially expected for 2022 will be further pushed back,” Wollmershaeuser added.
Ifo confirmed its already reduced growth forecast of 2.5% for this year.
The inflation rate is seen rising further in the short term, reducing the purchasing power of German consumers in light of meagre wage growth so far.
Ifo expects the national consumer price index (CPI) to rise by 3.1% this year and by 3.3% next year – both rates clearly above the European Central Bank’s price stability target of 2% for the euro zone as a whole.
“Rising costs associated with delivery bottlenecks play a driving role, as does the delayed adjustment to the increased energy and raw material prices,” Wollmershaeuser said.
In 2023, Ifo expects the inflation rate to normalize and ease to 1.8%.
(Reporting by Michael Nienaber; Editing by Paul Carrel)
