Global supply chain bottlenecks yesterday forced the German government to downgrade its growth forecast for this year, as it prepares to hand over the reins of a sputtering economy to the next coalition.
Supply chain disruptions and shortages of raw materials, including plastics, metals and paper, have choked off the recovery from the effects of the COVID-19 pandemic in Europe’s top economy.
As a result, the government cut its forecast for GDP growth this year from 3.5 percent to 2.6 percent, German Minister of Economic Affairs and Energy Peter Altmaier told public broadcaster ZDF.
Photo: AFP
“It will still be one of the strongest growth rates in Europe,” Altmaier said. “But many goods are not being delivered because there is a shortage of raw materials in many areas and that is simply having an effect. Higher energy prices are also a factor.”
“At 2.6 percent, the economy will still expand strongly this year, but it will only really begin to boom next year with growth of over 4 percent,” he added.
A scarcity of components has had a particularly hard impact on Germany’s manufacturing-driven economy, with production lines grinding to a halt in its auto sector.
Earlier this month, Germany’s leading economic institutes — DIW, Ifo, IfW, IWH and RWI — slashed their forecast for growth this year to 2.4 percent, from their forecast of 3.7 percent made in April.
The question of how to revive the economy might also be at the top of the agenda as the parties seeking to form the next German government were to pick up talks later yesterday.
In their initial agreement, the Social Democratic Party, Greens and Free Democrats (FDP) pledged massive investments and less red tape to prepare Germany for a greener and more digital future.
However, they vowed not to introduce any tax increases and to maintain Germany’s strict debt rule, which limits deficits to 0.35 percent of GDP in normal times, a red line for the FDP.
Finding a way to deliver on both would require “creativity” by the parties’ own admission, and could see the new coalition house their investment program somewhere else, such as public lender KfW, as per one mooted solution.
“It is now that much more important that a new government reduces obstacles and burdens, and puts the emphasis on innovation to avoid stalling the economic recovery,” Altmaier said.
The IG Metall union made a similar plea, as it called on members to take to the streets tomorrow, adding to the pressure on the next government.
The parties could “preach modernization,” IG Metall president Jorg Hofmann said, but added that “action has to follow quickly.”
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