Covid wave puts brakes on German economy

GERMANY’S economic growth is set to slow next year, a thinktank has warned.

The Ifo institute downgraded its forecast for growth in Europe’s biggest economy in 2022 to 3.7pc from an earlier estimate of 5.1pc.

Timo Wollmershauser at Ifo said: ‘Supply bottlenecks and the fourth wave of the coronavirus are noticeably slowing down the German economy.’

A production-heavy economy has been particularly badly hit by shortages of raw materials ranging from wood to semiconductors. Germany has also been battling a fourth wave of Covid, with businesses in some areas forced to close early and unvaccinated people barred from non-essential shops.

The forecast could be a headache for the new government, which took power last week, as it seeks to kickstart the economy with massive investments in digitalisation and climate projects.

Ifo said German GDP was expected to contract by 0.5pc in the final quarter of 2021. For 2021 as a whole, growth is set to come in at 2.5pc.

The figures are in stark contrast to the UK, which according to the International Monetary Fund (IMF) is predicted to grow at 6.8pc this year and 5pc in 2022.

Elsewhere, Kristalina Georgieva, head of the IMF has said that Britain has proved ‘more resilient than expected’.

She said the UK had ‘advanced in many respects versus this time last year’ – despite warnings in 2020 that growth could suffer when Britain split from the EU.

Its optimism was despite worries about Omicron. Mrs Georgieva praised Britain’s vaccination rollout. She said: ‘The foundation for this resilience came from a rapid vaccination campaign, and strong coordinated policy support.’