Germany economy expanded by 2.7 percent in 2021, remains below pre-crisis level – POLITICO

FRANKFURT (Reuters) – Preliminary data from the German Statistics Office showed on Friday that the German economy grew by 2.7 percent in 2021.

“Economic performance is yet to reach its pre-crisis level yet again,” said George Thiel, head of the Statistics Office. In 2020, the German economy contracted by 4.6 percent.

According to the report, economic performance increased in almost all sectors last year. However, the export-dependent country’s economy has been hit hard by global supply bottlenecks, leaving performance far from expectations.

Economist Carsten Brzeski described the data in ING. “Despite one of the largest fiscal stimulus packages during the pandemic, the German economy was disappointed in 2021. Frictions in the global supply chain have crippled industrial activity and affected economic activity.”

During a press conference presenting the data, Thiel emphasized that the economy likely contracted between October and December, given the new coronavirus wave. The Census Bureau added that on January 28, the Census Bureau will release official data for the fourth quarter of 2021, but a very preliminary estimate suggests a quarterly contraction of between 0.5 and 1.0 percent.

For Commerzbank economist Joerg Kramer, this downturn was “much more than expected”. In the first quarter of 2022, his team now sees an additional contraction “due to the rapidly spreading Omicron variable.”

Germany may not return to pre-crisis GDP levels for some time, as the Bundesbank’s latest forecasts similarly suggest. The Bundesbank said in December that it expected the economy to contract in the first quarter before gaining “significant momentum” in the spring.

By contrast, the eurozone’s economic output is expected to return to pre-crisis levels in the first quarter.

However, analysts and industry bodies remain optimistic that Germany’s recovery has only been delayed. Earlier this week, the Confederation of German Industries (BDI) said it expected GDP to grow by 3.5% in 2022. In December, the Bundesbank issued a more optimistic forecast for a 4.2% recovery in 2022 and 3.2% in 2023.

Meanwhile, the pandemic and related spending have led to the second-highest overall government deficit since the country’s reunification, according to the Census Bureau. Provisional accounts estimated the deficit at 153.9 billion euros at the end of 2021, compared to 145.2 billion euros in 2020.

This story has been updated.

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