Germany saw its expectations of a strong economic recovery in 2021 frustrated, due to the shortage of industrial inputs and the health crisis worldwide, which placed it behind the European countries.
The leading European economy recorded a slight 2.7% increase in its GDP from last year, according to preliminary data from the statistics institute Destatis published on Friday.
“The great expectations of the German situation at the beginning of 2021 were only partially fulfilled,” summed up Fritzi Köhler-Geib, chief economist at public bank KFW.
Optimistic at first, growth forecasts have been revised downwards several times throughout the year.
Due to “increasing supply and material difficulties”, “the fourth wave of Covid-19” and “a new reinforcement of government protection measures”, the economic recovery in 2021 has not been as expected, Destatis economists said at a press conference.
The growth of 2021 “is not enough to recover the sharp decline recorded in the first wave of coronavirus” and the creation of added value is still “less than 2.1%”, its level in the pre-pandemic, they added.
These data are almost humiliating compared to the 5% growth expected in the European Union as a whole, according to the latest projections from the European Commission, which anticipate an expansion of 6.5% in France and 6.2% in Italy.
This situation complicates the life of the government coalition led by the Social Democrat Olaf Scholz, who came to power in December with a list of important projects for which financing will have to be found.
“Disappointing”
“2021 has been very disappointing for Germany,” economist Carsten Brzeski of ING bank told AFP.
A disappointment that is explained by the supply problems of raw materials and components, to which was added at the end of the year a new wave of covid-19 pandemic, with its omicron variant.
The health crisis hit the service sector hard, where “reserves are getting smaller, profits are decreasing and investments are slowing down,” German Economy Minister Robert Habeck summed up on Thursday.
Industry, the engine of the German economy, was in turn hit by the shortage of raw materials and inputs, which shows no sign of ending. In December, 82% of the companies questioned by the IFO institute indicated hardships.
The strategic automotive industry registers a strong unsatisfied demand for semiconductors, essential for the manufacture of cars.
The purchase of new vehicles fell in 2021 by 10.1% compared to the already historically depressed 2020.
And no short-term reversal is expected. “We have to be clear: the semiconductor crisis is far from over,” Stefan Hartung, chief executive of auto-equipment maker Bosch, recently told Focus magazine.
Those shortages are the fuel for record inflation, also fueled by soaring energy prices, which is affecting the mood of consumers already hit by the pandemic.
Multi-million dollar investments
This situation could reduce the room for maneuver of the government coalition, made up of social democrats, environmentalists and liberals, when it comes to obtaining the multi-million dollar investments it needs to modernize the economy, with more “green” productions.
Despite everything, the government approved at the end of the year an extension of 60,000 million euros in the budget, for projects related to the fight against climate change.
And it foresees a progressive restoration of the situation, which according to the Bundesbank should start in “next spring” boreal.
The IFO institute forecasts growth of 3.7% in 2022.
“When Ómicron has passed and the supply problems have been resolved, the German economy will once again be the locomotive of the euro zone,” says Carsten Brzeski of ING.
The environmentalist Robert Habeck, at the head of the superministry of Industry and Climate, intends to change the perception that GDP is the determining factor in an economic policy.
Habeck expects the inclusion of other criteria as keys to success, such as “the preservation of natural resources” and “climate protection,” according to the weekly Spiegel.