ifo Economic Forecast Winter 2021: Supply Bottlenecks and Coronavirus Wave Slow Down German Economy

In the coming months, the ongoing supply bottlenecks and the fourth wave of the coronavirus are likely to noticeably slow down the German economy. All in all, GDP will grow by 2.5 percent this year and by 3.7 percent and 2.9 percent in the next two years. The inflation rate is likely to remain high. The rate should initially rise again from 3.1 percent this year to 3.3 percent next year. The cost increases associated with supply bottlenecks and delayed adjustments to higher energy and commodity prices will play a driving role here. Only in 2023 should consumer price increases return to normal and fall back to 1.8 percent. The unemployment rate is expected to fall from 5.7 percent this year to 5.2 percent on average in 2022 and 4.9 percent in 2023. In the current year, the deficit in government financing is expected to be EUR 162 billion. In the remainder of the forecast period, the government budget will recover, but will close both next year and the year after with deficits of a good EUR 80 billion and EUR 20 billion, respectively.