MNI Brief: Ifo Lowers Germany GDP Forecast for 2021

The Ifo institute has cut its Germany 2021 GDP growth forecast to 4.2% form an earlier estimate of 5.1%, now seeing the extra growth coming in 2022, according to their latest update published Wednesday. The Munich-based institute now sees growth in 2022 at +2.5% against the previous +1.7%.

The Ifo sees economic growth declining by 5.1% in 2020, based on an assumption that infection control measures put in place in November will remain active until March 2021 and will only be eased gradually from April onwards. The forecast does not take into account the closure of parts of the retail sector announced last Sunday. The closure of the retail sector in December will intensify the economic slump in Q4 as sales are usually highest in this month. Moreover, the Ifo expects unemployment to reach 5.9% in 2020 before it is projected to ease to 5.5% in 2021.

"Recent shutdowns in Germany and other countries are pushing the recovery back. Production of goods and services won't reach pre-crisis levels until the end of 2021," says Timo Wollmershäuser, Head of Forecasts at ifo, adding that the current year is likely to see a further decline in GDP as a result of shutdowns.