German Economic Growth Undershoot Projection This Year

Germany’s economic growth may fall short of expectations this year, the Bundesbank said in a monthly report on Monday, and that the resurgence of the coronavirus could impose unexpected pressure on the economy in the fall.

Europe’s largest economy is expected to grow by about 3.7% this year and 5.2% in 2022, but the bank stated that the first weeks of recovery were more modest than expected, and this is likely to affect the data for the whole year.

Despite this, Germany is expected to record strong growth during the summer months, as services benefit from the easing of restrictions with a decrease in the number of injured, which boosts tourism income.

The bank said that some restrictions could be re-imposed in the fall if infections continued to increase, but it expected that they would not be as stringent as in the past given the progress Germany has made in vaccinating its population.

Bundesbank reiterated that inflation could approach 5% by the end of the year, well above the ECB’s 2% target, and set to decline at a sharp pace early next year.