The German economy contracted in the fourth quarter of 2021



After the collapse in the first year of the pandemic, the German economy returned to growth in 2021, but the rebound is not as strong as expected, the last quarter closed down and the data allows us to advance that the coming months will be difficult. With GDP growth of 2.7%, the German economy returned to positive in 2021 from the 4.9% decline in 2020, according to data from the Federal Statistical Office, but the initial estimate on the behavior of GDP in the last quarter of the year worries analysts, especially considering that coronavirus is still rampant and global delivery bottlenecks are slowing down the economy.

"Even the pre-crisis level has not yet been reached," admits Georg Thiel, president of the Federal Statistical Office. Compared to 2019, the year before the start of the coronavirus pandemic, GDP in 2021 was up to 2% lower.

The Federal Statistical Office also warns that the German state spent significantly more money than it received in the second year of the pandemic. The deficit of the federal government, the Bundesländer, the municipalities and Social Security was 4.3% in 2021, the second highest deficit since German reunification. "In general, the economic recovery in 2021 has been weaker than we, and many others, had predicted at the beginning of last year," acknowledges Sebastián Dullien, scientific director of the Institute of Macroeconomics and Economic Research (IMK) of the Fundación Hans Boeckler. The clearest reason is the waves of infections since the fall, which are slowing consumption and causing problems in supply chains around the world. This, he adds, “will also have an impact in the first quarter of 2022. After that, however, a significant recovery could start. Overall, the chances of the German economy growing much faster in 2022 than in 2021 are very good." Economists also expect companies to invest more again starting in the spring, when there is less uncertainty about the further course of the pandemic.

In 2022, Thiel expects the German economy to grow comparatively strongly, between 3.5% and a good 4%. This situation complicates the life of the government coalition led by the Social Democrat Olaf Scholz, which also includes Greens and Liberals, who came to power in December with a long list of projects that require considerable public spending. As for the breakdown by sector, German industry was in turn hit by the shortage of raw materials and inputs, which shows no signs of abating.

semiconductor crisis

In December, 82% of the companies questioned by the IFO Institute indicated that they continue to suffer hardships in this section. The strategic automotive industry registers strong unmet demand for semiconductors, essential for car manufacturing. The purchase of new vehicles fell in 2021 by 10.1% compared to the already historically depressed 2020 and no reversal is expected in the short term. "We have to be clear: the semiconductor crisis is far from over," says Stefan Hartung, chief executive of auto-equipment maker Bosch. And to this we must add record inflation, also fueled by energy prices and affecting the mood of consumers.

DIHK Managing Director Martin Wansleben does not expect the pre-crisis level to be reached until later in the year. He also blames therising energy and commodity prices. In order to create incentives for private investment, therefore, he calls for changes in fiscal and financial policy: “The tax burden for German companies is now significantly higher than the average for other industrialized countries. The same applies to precious energy and digital infrastructure," he alleges.

Nobody expects a recovery until the spring of 2022 anymore, on a scale similar to that of the years after the deep recession of 2009 as a result of the global financial and economic crisis. What all economists agree on is that the main driver will be private consumption. Many households have huge savings because, for example, trips had to be canceled due to the pandemic and leisure activities were sometimes only possible to a limited extent. It is also assumed that companies will invest more again from the spring, when there is less uncertainty about the further course of the pandemic, and that exports, which are also a major driver of the German economy, will continue to suffer from logistical problems and bottlenecks. bottle in the delivery of raw materials and intermediate products in the coming months

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