2021.06.1612:30:00UTC+00German Ifo Institute Lowers Growth Outlook

The German economy is set to grow at a slower than previously estimated pace this year as the bottlenecks in the supply of intermediate products weigh on manufacturing activity, the ifo Institute said in its Summer forecast, released Wednesday.

Gross domestic product is expected to grow 3.3 percent in 2021, down from the 3.7 percent growth estimated in March. However, the projection for next year was lifted to 4.3 percent from 3.2 percent.

With falling infection rates and progress in vaccination against Covid-19, the existing economic restrictions should gradually be lifted, the think tank noted. There are no longer any obstacles to an economic recovery in trade and contact-intensive services by the end of 2021.

But the manufacturing boom is likely to cool somewhat in its further course due to the bottlenecks in the supply chain.

The unemployment rate is expected to average 5.8 percent in 2021 and 5.2 percent in 2022.

While short-time work will fall back to its pre-crisis level in the coming year, unemployment will remain above this level at an annual average of 2.4 million people.

Consumer price inflation is seen at 2.6 percent in 2021, up from the Spring forecast of 2.4 percent. The outlook for 2022 was raised to 1.9 percent from 1.7 percent.