RWI Konjunkturberichte

Economic activity in Germany is picking up again in the wake of the relaxation of infection control measures. In the first quarter, a renewed tightening of these measures caused economic activity to decline. In the meantime, restrictions have been eased due to the falling number of new infections with the coronavirus, so that a recovery has begun, particularly in the service sectors. With the expected strong expansion in economic output, services are likely to drive the economic recovery in the short term. By contrast, the manufacturing sector is expected to be temporarily held back by increasing supply bottlenecks for raw materials and intermediate products. On the demand side, private consumption in particular is likely to benefit from the easing. With a slight delay, however, private investment is also likely to expand more significantly again. Overall, we expect GDP to expand by an annual average of 3.7% this year and 4.7% next year. However, the recovery from the economic consequences of the Corona pandemic will take place mainly this year. Thus, GDP will reach pre-crisis levels by the end of this year. The recovery in the labor market was held back in the first half of this year by the ongoing infection control measures. In order to keep employees in work, increased use was again made of short-time working. As the year progresses, however, the number of people on short-time working is expected to fall rapidly, although the regulations for simplified access to short-time working have been extended once again. This is borne out by experience from last year. In the third quarter, short-time working is expected to reach its usual pre-crisis level. The number of people in work is expected to increase only slightly overall in 2021 following the significant corona-induced decline this year. At 0.4% in the current year, the number of employees subject to social insurance contributions will recover much faster than the number of self-employed. After climbing to 5.9% in 2020, the unemployment rate is expected to fall to 5.8% this year and to 5.2% next year. Consumer prices in Germany have risen significantly since the beginning of this year due to unusual events. In the forecast period, price increases for some raw materials and intermediate products are likely to increase price pressure on consumer prices. We therefore expect consumer prices to rise by an average of 2.5% this year. In the coming year, inflation is expected to average 1.9%. The public budget deficit in 2021 is expected to be just short of 160 billion euros, once again higher than the prior-year figure (149 billion euros). A major reason for this are the corporate subsidies still being paid out in the wake of the Corona pandemic. The supplementary federal budget for 2021 provides for corporate aid of 65 billion euros. The actual amount is likely to be lower; we assume around 30 billion euros. Government spending is expected to decline in 2022. The budget deficit is then expected to be just under 68 billion euros.

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