IWH Economic Outlook 2022

German Economy not yet Immune to COVID 19 ‒ Outlook Clouded Again

Halle, December 14, 2021

 

The current pandemic wave and supply bottlenecks cause the German economy to stagnate in winter. When infection rates go down in spring, private consumption will increase significantly. In addition, supply restrictions will be gradually reduced. As a result, the economy will regain momentum. The Halle Institute for Economic Research (IWH) forecasts that German gross domestic product will increase by 3.5% (East Germany: 2.7%) in 2022, after 2.7% (East Germany: 2.1%) in the current year. Inflation is expected to decline only slowly.

The uncertain course of the pandemic is still the main risk for the German economy. Restrictions will be gradually tightened until the infection figures drop significantly. In case of a severe winter lockdown such as a year ago, a similarly significant drop in production would have to be expected. Economic developments for the rest of the year will largely depend on how controllable the Omikron virus variant will be, and finally there is the possibility of new variants spreading.

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