The growth of the German economy could lag behind forecasts

The growth of the German economy this year could fall short of forecasts, as the recovery of the new coronavirus pandemic may cause unexpected complications in the autumn. The central bank, the Bundesbank, stated this in its regular monthly report on Monday. According to the current forecast, the gross domestic product (GDP) of the largest European economy should increase by 3.7 percent this year and by 5.2 percent in 2022. However, the start of its recovery was weaker than expected, which is likely to have an impact on full-year performance, the Bundesbank said. It also recalled that the German economy is likely to continue to grow strongly during that quarter, with the services sector benefiting from easing restrictions following the decline of those infected at the beginning of the summer. This will increase tourism revenue. However, some restrictions could be introduced again in the autumn if the number of infected with the much more contagious delta variant of the new coronavirus continues to increase. On the other hand, given Germany's progress in vaccinating the population, they are unlikely to be as strict as in the past, the Bundesbank wrote. However, vaccination is slowing, which poses a risk, and sentiment indicators point to heightened concerns as Europe faces a more infectious variant of the coronavirus. "Delta variants and a decline in vaccination dynamics could again lead to tighter protection measures," the Bundesbank added. "Then that would mean a greater burden on the economy in the autumn quarter." The Bundesbank reiterated its previous view that the country's inflation rate could approach 5% by the end of the year, well above the European Central Bank's 2% target, but will fall sharply early next year.