Germany Economic Forecast

Germany Economic Outlook

September 28, 2021

Voters went to the polls on 26 September, delivering a victory for Finance Minister Olaf Scholz’s Social Democrats and dethroning the Christian Democratic Union in the first election of the post-Merkel era. However, a new government is unlikely to be formed before the end of the year as the Bundestag has become more fractured. The poll took place against a largely positive economic backdrop. Although retail sales swung into contraction in July, the unemployment rate ticked down further overall in July–August compared to Q2, while consumers turned notably less pessimistic on average in the quarter as a whole. That said, private-sector activity seemingly cooled somewhat at the tail end of Q3. Business sentiment fell back into pessimistic territory in August–September, and business conditions expanded at the softest pace in seven months in September, with industrial activity feeling the pinch from supply shortages.

Germany Economic Growth

Firming aggregate demand will see the economy return to growth this year, and momentum will pick up further next year. Household consumption is expected to gain steam in 2022 amid a tighter labor market and the removal of restrictions. However, downside risks persist amid lingering uncertainty over the course of Covid-19, elevated price pressures and supply-side issues. FocusEconomics Consensus Forecast panelists project the economy to grow 3.1% in 2021 and to expand 4.5% in 2022, which is up 0.1 percentage points from last month’s forecast.

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Germany Facts

Value Change Date
Bond Yield-0.190.41 %Jan 01
Exchange Rate1.120.65 %Dec 31

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