"Winter low follows summer high"

The German economy is on the verge of a "summer high": The German Institute for Economic Research (DIW) expects an upswing in Germany from early summer. Gross domestic product is likely to grow by 3.0 percent this year and by 2.9 percent in 2023. This emerges from the current forecasts of the DIW.

"The corona pandemic still has the German economy under control," said DIW President Marcel Fratzscher. "It would be wrong to hastily declare the end of the pandemic – nevertheless, the economic situation will probably improve significantly in the early summer." The order books of many companies are full: "They are already in the starting blocks and are just waiting to be able to produce more when the corresponding supply chains are intact again," said Fratzscher. Because foreign demand for products "Made in Germany" is likely to increase again this year and next, if the pandemic subsides as expected.

Recovery is not a sure-fire success

However, in view of the numerous risks, this is not a sure-fire success: "The Russia-Ukraine conflict in particular represents a danger," said the forecast published today. In addition, China's real estate sector is threatened with a major financial crisis. The corona pandemic and the inflation rate could also cause problems again.

For the inflation rate, the DIW expects an increase of 3.8 percent this year due to the sharp rise in energy prices and shortages of many goods. This would mean inflation would be even higher than last year, when the annual average inflation rate was 3.1 percent. In 2023 it may well be well below the two percent mark again.

number of employed persons increases

However, the labor market should hardly be affected by the current economic restrictions: "The current economic restrictions are hardly affecting the labor market in this country," said DIW economic expert Simon Junker. The number of people in work is expected to increase by 370,000 this year, and then by a further 280,000 in 2023. The pre-pandemic level would then be reached again by the end of 2022.

Nevertheless, the institute considers the forecast to be more uncertain than in normal times: "It is important for the German economy to get into calmer waters – but that is not solely in our hands," said DIW President Fratzscher: "It is all the more important to tackle the major challenges with a view to the transformation towards a climate-friendly and digitized German economy."