The German economy is expected to grow by 3.5 percent this year

The Monetary Fund expects the unemployment rate to increase slightly this year.

The International Monetary Fund (IMF) predicts that the German economy should grow by 3.5% this year after declining by 5.4% last year. At the same time, it expects a significant decline in the budget deficit, on the other hand, it expects unemployment to increase slightly. However, in its report following Article IV consultations, the Fund stated that the recovery would be volatile and uneven from an economic sector perspective. "The recovery process should be strengthened by the widespread distribution of an effective vaccine, yet the economy is not expected to return to pre-pandemic levels until 2022," the IMF said. This year's development of the German economy may be affected by high dependence on exports and financial openness, which makes the German economy sensitive to a possible sharp decline in foreign demand. One of the long-term challenges is the aging of the population or the transition to green energy, to which are now added the structural changes caused by the pandemic. In addition, the IMF expects the unemployment rate to rise slightly this year. As IMF said, it should increase from 4.2 to 4.3%. However, the budget deficit should fall sharply. The IMF estimates that it could reach 3.4% of gross domestic product (GDP) compared to 6.3% of GDP in 2020.