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German Economy Grew by 2.7% in 2021 as Country Tackled Supply Chain Issues, Surging Covid Cases

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  • The German economy grew by 2.7% in 2021 after another year of surging Covid-19 cases, pandemic-related restrictions and supply chain pressures, preliminary data showed Friday.
  • The statistics office said that German growth was still 2% lower in 2021 than in 2019.
  • On Thursday, Germany's public health agency, the Robert Koch Institute, warned that the number of new Covid cases is continuing to increase rapidly.

The German economy grew by 2.7% in 2021 after another year of surging Covid-19 cases, pandemic-related restrictions and supply chain pressures, preliminary data showed Friday.

It comes after the largest euro economy shrunk by 4.6% in 2020 — the first year of full lockdowns and tough social restrictions in the wake of Covid.

"Despite the continuing pandemic situation, more delivery bottlenecks and material shortages, the German economy managed to recover from the sharp fall last year although the economic performance has not yet reached its pre-crisis level again," Georg Thiel, president of the Federal Statistical Office said Friday, according to a statement.

The statistics office said that German growth was still 2% lower in 2021 than in 2019, showing that the economy has not yet returned to pre-Covid levels.

In the second half of 2021, signs emerged that the German economy could be hit by supply chains issues. In October, the country's leading research institutes slashed their forecasts for growth in 2021 to 2.4%. The German government also lowered its expectations for annual growth in 2021.

Looking ahead, upcoming economic performance remains clouded by uncertainty.

On Thursday, Germany's public health agency, the Robert Koch Institute, warned that the number of new Covid cases is continuing to increase rapidly. The latest figures point to new daily infections of around 80,000 people.

"The annual [GDP] numbers mask a contraction in the economy in the final quarter of 2021, emphasizing the high risk for the economy to fall into an outright recession at the turn of the year," Carsten Brzeski, global head of macro at ING, said in a note to clients on Friday.

Economists at Pantheon Macroeconomics also said the release "confirms that GDP growth slowed sharply" in the last quarter of 2021.

Going forward, they expect growth to be marginal at the start of 2022, followed by a rebound in the second quarter of 2022.

Higher deficit

In addition, Germany saw an increase in net borrowing in 2021.

The statistics office said that financial deficit stood at 153.9 billion euros ($176.46 billion) at the end of the year — higher than the 145.2 billion euros recorded in the previous year.

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