FRANKFURT (Reuters) – Supply chain bottlenecks and new restrictions related to the COVID-19 pandemic will stall growth in Germany around the turn of the year, delaying the recovery of Europe’s biggest economy, the Bundesbank said on Friday.
Struggling with supply shortages, Germany’s vast industrial sector has been unable to meet surging demand in recent months and bottlenecks are now expected to last well into next year, pushing out what was expected to be a robust rebound.
“The German economy will experience a setback in the final quarter of 2021 and the first quarter of 2022 on account of the pandemic, but is set to pick up significant momentum again in spring of next year,” the central bank said in a biannual update of its economic forecasts.
“While pandemic-related restrictions and supply bottlenecks for intermediate goods will stall growth in the final quarter of 2021 and the first quarter of 2022, … private consumption is expected to rise substantially from spring onwards.”
The bank now sees German growth at 4.2% in 2022, below the 5.2% projected six months ago and also below the 4.6% expected by the European Commission.
But growth in 2023 is now seen at 3.2%, almost double June’s 1.7% forecast, suggesting the expansion will be delayed rather than lost.
Inflation projections were also revised up.
Price growth is now expected to hold above the European Central Bank’s 2% target throughout the Bundesbank’s projection horizon.
Consumer price inflation is now seen at 3.6% in 2022, double the rate projected six months ago, before a decline to 2.2% in both 2023 and 2024, the German central bank said. (This story corrects 2023 growth in 6th paragraph to 3.2%)
(Reporting by Balazs Koranyi; editing by John Stonestreet)
