Germany is Struggling to Deal with Challenges

Germany has the largest economy in Europe, and the country has retained the status of Europe’s most powerful economy for a long time. Still, its economy is teetering on the brink of recession this winter due to various reasons. 

The country’s economy will shrink 0.5% in the fourth quarter of 2021, compared with the year’s third quarter. The economy of Germany will not recover in the first quarter of 2022. The information provided by the Ifo Institute for Economic Research underlines the severity of the problem. The country’s economy is in recession when it contracts for two consecutive quarters.

Timo Wollmershäuser from Ifo Institute for Economic Research commented on the economy. Wollmershäuser stated that the supply bottlenecks, as well as the fourth wave of Covid-19, are noticeably slowing the country’s economy.

Germany and Covid-19

The Ifo Institute for Economic Research decided to reduce its forecast for 2022 by 1.4 percentage points to 3.7%. Hopefully, growth is expected to pick up next summer as a wave of coronavirus cases subsides and bottlenecks ease. But the slow start to the year will cost the manufacturing powerhouse. 

The institute expects inflation to increase by 3.1% in 2021 and 3.3% in 2022, rates that far exceed the ECB’s target of 2%. Furthermore, forecasts show consumer prices will not return to normal until 2023. 

Germany and other countries are trying to reduce the number of new cases. Last week, the country recorded its highest number of daily deaths from Covid-19 in more than six months. Hospitals across the country are struggling to deal with the increasing number of intensive care patients. This month, Germany banned unvaccinated people from accessing all but the most essential businesses, such as supermarkets, as part of new restrictions.

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