“The crisis is slowly being overcome”. This is how the economists of leading economic research institutes have called their “joint diagnosis”, which they prepare twice a year. But the positive spin of the headline is overshadowed by the central figures of the analysis: According to the experts, the gross domestic product will only grow 2.4 percent in the current year. In the spring report they had forecast a plus of 3.7 percent. So the outlook has deteriorated significantly.
The economy has picked up significantly since spring, according to the preface. “However, supply bottlenecks in the manufacturing sector are hindering production, so that so far only the consumer-related service sectors have grown,” the authors continue to write there. “The recovery is likely to continue to be slowed in the winter half-year.” A complete normalization of “contact-intensive activities” is not to be expected in the short term.
The researchers are also concerned about inflation. Here they expect values to rise by the end of the year – but they will decline again in the coming year. The economic research institutes expect consumer prices to rise by 3 percent in the current year. In the coming year, the price hike is expected to subside somewhat and inflation to fall to 2.5 percent – but that would still be a high level.
One could give the all-clear for the “acute inflationary pressure”, said Stefan Kooths from the Kiel Institute for the World Economy. Consumer prices would adjust themselves again in the course of the coming year – also because special effects would then disappear. The withdrawal of the temporary VAT cut in the second half of 2020 is currently having a full impact on inflation.
The job market and income are well on their way
According to the forecast, the unemployment rate is likely to decline, and disposable incomes will rise significantly in the coming year. Specifically, this means: Employment should continue to grow, the unemployment rate will fall to 5.7 percent this year after 5.9 percent in the previous year.
According to the forecast, the incomes of private households will increase this year due to financial policy measures such as the partial abolition of the solidarity surcharge at the beginning of the year. The institutes anticipate that disposable income will rise by 2.1 percent. In the coming year, the increase is likely to be higher at 4.4 percent.
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In general, the outlook for the coming year is better than that for the current year in almost every respect. Economists expect growth of 4.8 percent in 2022. In their spring forecast, they had assumed an increase of 3.9 percent for the next year.
Private consumption as a driver of the economy
A key driver of the economic recovery in the coming year will be private consumption, said Oliver Holtemöller from the Leibniz Institute for Economic Research in Halle. In the corona pandemic, many consumers put money on the high edge, and the savings rate has risen. “If the pandemic no longer affects economic activity in the spring of next year, consumption will recover at strong rates,” says the forecast.
Economics Minister Peter Altmaier (CDU) said the German economy is recovering and growing. However, the pace of growth has slowed down. DIHK managing director Martin Wansleben said the economic recovery after the pandemic was stuttering. The economy needs a noticeable “investment jolt”.
Criticism of previous climate policy
With a view to the negotiations on a new federal government, the economists called on politicians to carry out reforms. The pension system is not stable, said Holtemöller. In fact, measured against the tonality of other scientific reports, the researchers are comparatively harsh with the climate policy of the previous federal government. “The current climate policy is not sufficient to achieve the emission targets and unnecessarily expensive for given targets,” it says.
“Instead of micromanaging small-scale sector-specific guidelines or setting a date for the coal phase-out, the state should gradually reduce the CO2 certificates and leave it to the market players to find the most cost-effective CO2 savings.” The researchers continue to demand that the framework conditions for this will have to be significantly improved.
In addition, the “scope for distribution” will become smaller in the coming years, according to Holtemöller. This is also related to the aging of society. Fewer workers per inhabitant would have to generate the income, a larger part of the income than before would have to be invested in order to master climate protection. Holtemöller said: “Politicians and the population in Germany have not yet fully understood that climate protection means that we have to tighten our belts.” (with dpa)