In the latest annual report, the German Council of Economic Experts said, “a variety of bottlenecks on the supply side are disrupting global value chains and, combined with the pandemic-related restrictions that are still in place, are holding back growth.”
It forecasts Germany GDP to grow 2.7% in 2021 and 4.6% in 2022. And that subject to “significant risks” including “return of extensive measures to stop the spread of the coronavirus or persistent supply and capacity bottleneck”.
The GCEE projections an inflation rate for Germany of 3.1% in 2021 and then 2.6% in 2022. “Longer-lasting supply-side bottlenecks, higher wage settlements, and rising energy prices pose a risk, however, that what are in fact temporary drivers of prices could lead to persistently higher inflation rates,” it said.
“Fiscal policy needs to normalise following the crisis. Public finances have to be made more sustainable and crisis-resilient again,” says Volker Wieland, member of the GCEE. “The best way for monetary policy to contribute to sustainable economic growth is by maintaining price stability. A normalisation strategy should be published for this purpose.”
