German 2021 growth seen weaker due to virus curbs: economic institutes

BERLIN: German economic growth will be weaker than expected in 2021, leading research institutes said Thursday, as ongoing coronavirus restrictions continue to slow a recovery by Europe's largest economy.

Germany's gross domestic product will expand by only 3.7 percent this year, five economic think-tanks including Ifo, DIW and RWI said in their annual spring report, revising down more optimistic predictions made in the autumn by one percentage point.

"As a result of the ongoing shutdown, economic performance is expected to drop by 1.8 percent in the first quarter," said Torsten Schmidt of RWI.

Yet researchers predicted that the economy would bounce back and unemployment figures would decrease as lockdowns were eased and more people were vaccinated in the middle of the second quarter.

"We expect a significant expansion of economic activity in the summer, especially in the hard-hit service sectors," said Schmidt.

The spring forecast also predicted growth of 3.9 percent in 2022, and said the state deficit as a percentage of gross domestic product would also shrink next year.

While the cost of tests and vaccinations would see the deficit remain at 4.5 percent of GDP in 2021, that figure would shrink to 1.6 percent the following year, the report said.

German GDP contracted by 4.9 percent in 2020, and hopes of a quick recovery this year have been thwarted by ongoing restrictions in the face of a third wave of infections.

Bars and restaurants have been closed since November and non-essential shops since December in the country.

With case numbers rising, Chancellor Angela Merkel's government is trying to tighten, rather than ease restrictions.

On Tuesday, Merkel's cabinet agreed a new law which would allow Berlin to impose night-time curfews and close shops and schools in areas with high infection rates.