Bundesbank upgraded Germany GDP growth forecast to 3.7% (from 3.0%) in 2021, 5.2% in 2022 (from 4.5%). Growth is expected to slow to 1.7% in 2023. It said that “the German economy is overcoming the pandemic-related crisis and is at the beginning of a strong upswing”. The economy is expected to reach pre crisis level again “this summer”.
Inflation to also projected to accelerate to 2.6% yoy this year (upgraded from 1.8%). For 2022, inflation forecast is upgraded to 1.8% (from 1.3%), and for 2023 at 1.7% (from 1.6%). It added, “the exceptionally high inflation rates, by German standards, projected for the second half of 2021 could ultimately shift economic agents’ inflation perceptions and expectations,”
“As a result, wage and price-setting behavior could change and exert further inflationary pressure. This would especially be the case if headline price inflation in the near future were to be even higher than estimated here”, the report added.
