Supply Chain Woes Drive Down German Growth Outlook For 2021

Economists cut their growth forecast for Germany on Wednesday as shortages in key components, including computer chips, weigh on the country's industrial sector

Frankfurt, Sept 22 (UrduPoint / Pakistan Point News - 22nd Sep, 2021 ) :Economists cut their growth forecast for Germany on Wednesday as shortages in key components, including computer chips, weigh on the country's industrial sector.

The Munich-based Ifo institute said Europe's largest economy would grow 2.5 percent this year, down 0.8 percentage points from its previous prediction, due to supply chain upheaval.

But they raised their growth forecast for 2022 by 0.8 percentage points to 5.1 percent, as the economic rebound from the coronavirus is delayed.

"The expected strong summer recovery" did not materialise, Ifo economist Timo Wollmershaeuser said.

The economy was "split", he said, with services and hospitality showing a strong recovery after coronavirus curbs eased, while "industrial production is shrinking because of supply bottlenecks." A global semiconductor chip crunch, driven by rising demand for electronic consumer goods and coronavirus-related disruption in supply chains, has had an acute impact in export powerhouse Germany.

Like other countries, Germany is also struggling with shortages of key raw materials including plastics, steel and lumber.

Germany's vital car industry has been hard hit by the scarcity in semiconductors, a crucial component in both conventional and electric vehicles, forcing carmakers to trim production.

On Wednesday, German auto giant Volkswagen's truck subsidiary said it would "remove" computing components from unsold vehicles to fulfil orders of other models.

Last week the German Economics Institute (DIW) in Berlin cut its growth projection for 2021 from 3.2 to 2.1 percent, citing similar factors to Ifo.

Economy Minister Peter Altmaier had said in June that German growth could reach four percent in 2021, a goal which now seems out of reach.