Germany risks becoming the eurozone’s economic laggard, as economists worry that restrictions to contain a fresh surge in Covid-19 infections will hit consumer activity and compound the supply chain problems already throttling industrial output.
The German Council of Economic Experts, which advises the government, became the latest group to cut its forecasts for growth in Europe’s largest economy on Wednesday, warning that supply problems are taking a greater toll than expected on manufacturers.
“These supply-side bottlenecks are slowing down industrial production above all, and Germany is affected particularly badly by this, more than countries in which industry makes up a smaller share of GDP,” said Volker Wieland, professor of monetary economy at Frankfurt’s Goethe University.
Wieland said the country’s economic recovery remained intact, although it “will be a little delayed until the bottlenecks are gradually resolved”. The council cut its growth forecast for this year from 3.1 to 2.7 percent but raised its prediction for growth next year from 4 to 4.6 percent.
That would give Germany one of the slowest 2021 growth rates in the eurozone, where overall output is expected to be 4 percent higher this year. Although the German economy declined less than most eurozone countries last year, it is expected to take longer to return to pre-pandemic levels than the bloc overall — although Spain remains further behind.
For the fourth quarter, the council forecast the German economy would grow only 0.4 percent, down from 1.8 percent in the third quarter and well below the 1.2 percent the European Central Bank forecast for the overall eurozone in the final three months of 2021.
“Germany is increasingly looking like the laggard of the euro area,” said Holger Schmieding, chief economist at