By Canadian Press

German economist panel cuts 2021 growth outlook to 3.1%

Mar 17, 2021 | 8:40 AM

BERLIN — The German economy — Europe’s biggest — will grow by 3.1% this year, the government’s panel of independent economic advisers forecast on Wednesday, cutting its previous prediction somewhat.

The panel’s new outlook compared with a forecast of 3.7% in November, made at the beginning of a second round of coronavirus-related closures that are largely still in place.

Last year, Germany’s gross domestic product shrank by 4.9%. That ended a decade of growth and was the biggest decline since the financial crisis in 2009. However, Germany’s economy did better than several others in the 19-country eurozone as it was supported by manufacturing, which has taken less of a hit than services during the pandemic.

For 2022, the economists predicted growth of 4%.

“Despite the second wave of infections and, at least here in Germany, an ongoing lockdown, we are far from the difficult economic situation in Spring 2020,” panel member Volker Wieland said. World trade has picked up significantly, he said, with economic activity improving in China, Asia and the United States in particular.

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Germany’s economy grew 0.3% in the fourth quarter compared with the previous three-month period. Wieland said a drop is expected in the current quarter, but the recovery should resume thereafter — helped by progress in a so-far slow vaccination campaign.

German authorities started loosening some virus-related restrictions in recent weeks, opening hairdressing salons, some schools, nonessential shops and museums.

But much remains closed. Restaurants, bars, hotels and many culture, leisure and sports facilities have been shut since early November. Most lockdown measures are in place until at least March 28. Authorities are due to consider the way forward on Monday, and now face a steady rise in new infections as a more contagious coronavirus first detected in Britain takes hold.

A “third wave” of infections could, if it is heavy, delay the recovery, Wieland said.

“But there would only be a significant decline in economic output if there were far-reaching restrictions or closures in industry in Germany,” he said.

Authorities haven’t yet imposed any such restrictions. Wieland said they should be avoided by speeding up vaccinations, expanding testing and improving technology-based infection tracking.

Geir Moulson, The Associated Press