German government raises 2021 economic growth forecast

Germany is raising its economic growth forecast for the year on the expectation of the gradual lifting of coronavirus restrictions and an anticipated rise in domestic spending, the economy minister said Tuesday.

Peter Altmaier said gross domestic product is expected to increase 3.5% in 2021 now, up from a previous forecast of 3%, and that it should grow 3.6% in 2022.

He said that the government’s “comprehensive and quick support” for businesses had paved the way for a return to pre-pandemic levels by next year for Europe’s largest economy.

“Our economy is strong, robust and ready for a new start,” he said.

Last year, Germany’s gross domestic product shrank by 4.9%. That ended a decade of growth and was the biggest decline since the financial crisis in 2009.

It did better than several others in the 19-country eurozone, however, as it was supported by manufacturing, which has taken less of a hit than services during the pandemic.

The government prognosis is more optimistic than a forecast last month from its panel of independent economic advisers, which predicted 3.1% growth in 2021.

On the other hand, a group of leading German economic institutes two weeks ago forecast 3.7% growth in 2021.

In an effort to try and slow the spread of the pandemic in Germany, restaurants and bars are closed for indoor dining, nonessential travel is discouraged and much nonfood and nonpharmacy retail is restricted.

Lawmakers last week approved legislation that applies an “emergency brake” consistently in areas with high infection rates, doing away with the patchwork of measures that has often characterized the pandemic response across Germany’s 16 states.

Those rules, which automatically come into force in regions with more than 100 newly reported cases a week per 100,000 inhabitants, include a 10 p.m. to 5 a.m. curfew, as well as further limits on personal contacts and nonessential stores.

Altmaier said the economic forecast is partially based on the assumption that measures can be gradually relaxed starting in the second quarter.