German economy expected to grow by 3.5% this year

German economy expected to grow by 3.5% this year

Germany’s BDI industry association said on Tuesday it expected Europe’s largest economy to grow 3.5% this year after plunging roughly 5% in 2020 but that it wouldn’t be able to return to its pre-pandemic level until next year at the earliest, Trend reports with reference to Reuters.

The BDI forecast is less optimistic than the government’s estimates, published in October, in which Berlin predicted gross domestic product to rebound with an expansion rate of 4.4%.

BDI President Siegfried Russwurm said the economy won’t be able to return to its pre-crisis level in 2021 due to the second wave of the pandemic.

“But there should be a good chance that it will do so in the first half of 2022,” Russwurm added.

The Federal Statistics Office will release a flash estimate for full-year 2020 GDP figures on Thursday. The government will update its GDP growth forecast for 2021 later this month.

BDI said it expected Germany’s export-oriented industrial sector to drive the recovery this year as the global economic outlook for 2021 had improved. The lobby group sees exports jumping 6% this year after plunging roughly 11% in 2020.

“The election of Joe Biden as U.S. President facilitates the path for multilateral solutions and joint initiatives for fair competition on the world markets,” Russwurm said.

“Our companies will benefit from both China, the driver of global growth, and the agreement on an investment pact, even if it is not perfect.”

The industry group called on the government to increase public investment in infrastructure over the next decade, cut corporate taxes and reduce red tape for firms which were trying to innovate.

BDI warned that the newly introduced CO2 price could force energy-intensive sectors to relocate to other countries with less strict climate protection regimes. Berlin therefore should think about a “correction mechanism” to avoid job losses.

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