The German economy did not fully recover from the Corona crisis in 2021.

The gross domestic product (GDP) increased last year by 2.7 percent after seasonal and calendar adjustment compared to the previous year, as the Federal Statistical Office announced in a first estimate on Friday.

However, economic output was still 2 percent below its pre-crisis level.

"Economic development in 2021 was also heavily dependent on the occurrence of corona infections and the associated protective measures," said Georg Thiel, President of the Federal Statistical Office.

In 2020, the corona pandemic caused GDP to collapse by 4.6 percent.

Svea Junge

Editor in Business.

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The catching-up process was slowed down by the corona restrictions and delivery bottlenecks. According to statisticians, the economy shrank in the fourth quarter. According to economists, GDP is likely to fall again in the next few months. At the beginning of 2021, economic output had already fallen by 1.9 percent compared to the previous quarter due to the lockdown. As now, restaurateurs, service providers and retailers in particular suffered from the Corona measures.

However, after the restrictions were gradually eased in the spring, private consumption picked up again. Economic output increased by 2 percent in the second quarter and by 1.7 percent in the third quarter. Economists expect consumers' willingness to buy to fuel the upswing again this spring. Due to canceled vacation trips and restrictions on leisure activities, private households are sitting on high savings.

However, industry, which was the driving force behind the economic recovery for a long time, has had problems getting enough raw materials and intermediate products since the summer.

The order books are full, but industrial companies cannot keep up with production.

Most recently, the order backlog was around a quarter higher than before the crisis, while production was 7 percent below its pre-crisis level.

Serious shocks to supply chains

The reason for the supply bottlenecks is that demand returned faster and more strongly than expected after the slump in 2020, plus unforeseen shocks to the supply chains: the fire in a Japanese chip factory, the traffic jam in the Suez Canal and corona-related port closures in Asia - to name just a few name – made for a perfect storm. As a result, prices rose sharply, which additionally fueled the general upward trend in prices. In December, the inflation rate climbed to 5.3 percent compared to the same month last year – the highest level in 30 years. Over the year as a whole, everyday items rose in price by an average of 3.1 percent.

An easing of the bottlenecks is not in sight for the time being, because with the increasing omicron infections in Asia there is a growing risk that factories and ports will have to close again suddenly. The Chinese government, which is pursuing a no-Covid strategy, has already locked down several megacities in recent weeks.

The industry association BDI therefore expects another “stop-and-go year” in 2022. "Despite full order books, the lack of microchips, components and raw materials will continue to affect production for a long time," said BDI President Siegfried Russwurm on Thursday. “These bottlenecks will slow down industrial value creation by more than 50 billion euros in 2021 and 2022.” He expects economic growth of 3.5 percent this year. The forecasts of the major economic research institutes are between 3.5 and 4 percent growth.

It is also uncertain what effects the omicron wave will have in this country.

The World Health Organization (WHO) estimates that more than half of the population in Europe could become infected with the omicron variant in the next six to eight weeks.

In order to secure the critical infrastructure, the Bundestag voted on Thursday for shortened quarantine rules.

However, adverse effects on the economy cannot be ruled out.

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