The German economy is not expected to reach pre-crisis levels until 2022
The International Monetary Fund (IMF) believes that Germany will make a noticeable recovery from the corona crisis this year. The IMF announced that the economy should grow by 3.5 percent. The pre-crisis level will therefore not be reached again until 2022. The IMF praised the fact that Germany got through the pandemic better than comparable countries.
According to the experts, however, the German government should not stop the economic aid measures too early. The IMF explained that fiscal policy must remain expansionary until the economic recovery has stabilized. If the economy develops weaker than expected, additional funds should be made available. Germany has enough options to top it up in an emergency. In this context, the IMF welcomed the fact that Finance Minister Olaf Scholz (SPD) will also be able to override the debt brake in 2021 with the help of the Bundestag. “There will be a lot of pain,” said IMF expert Shekhar Aiyar, referring to the withdrawal from aid programs. “This is a delicate balancing act.”
In 2020, the German economy shrank by 5.0 percent due to the consequences of the pandemic, the first time in eleven years. The last time there was a stronger minus in the global financial crisis was 5.7 percent at the time. Like the IMF, most economists are now assuming growth of 3.5 percent or a little more for 2021. The German government has so far forecast 4.4 percent, but will revise this estimate at the end of January. The longer lockdown should make for a more cautious forecast.