Annual economic report: Habeck expects “difficult catch-up phase”

In its new annual economic report, the federal government is assuming a weak economic start to the new year. Economics Minister Habeck expects an inflation rate of 3.3 percent for 2022.

The economic recovery from the coronavirus crisis will be weaker than expected this year and will be accompanied by higher inflation.

The federal government came to this conclusion in its annual economic report 2022, which was decided in the cabinet in the morning and presented to the Federal Minister of Economics, Robert Habeck, in the afternoon. The Green politician spoke of a “difficult economic catch-up phase”.

Government lowers growth forecast

For 2022, the government expects gross domestic product (GDP) to grow by 3.6 percent. The previous government assumed 4.1 percent in the fall. With the expected plus, “economic output will be above the pre-crisis level for the first time,” explained Habeck’s ministry.

Last year, GDP grew by 2.7 percent, in the first Corona year 2020 there was a significant slump of 4.6 percent.

Consumer prices will continue to rise

The people in Germany cannot hope for a rapid relaxation – inflation has climbed to its highest level for almost 30 years. Overall, it is expected that the rise in consumer prices this year will again be significant at an annual average of 3.3 percent,” says the report.

On average over the past year, consumer prices have increased by 3.1 percent. Above all, higher energy costs are fueling inflation.

Further delivery bottlenecks for semiconductors

According to the report, supply bottlenecks for semiconductors, for example, remain a key price-driving factor this year. A gradual relaxation is only to be expected in the course of 2022. Until then, companies are likely to raise prices noticeably.

“With an increasing vaccination rate, it should soon be possible to contain the pandemic in a sustainable manner and to reduce crisis aid,” said Habeck. “Then the economic recovery will accelerate noticeably.”

Fewer unemployed expected

Habeck called the prospects for the job market “quite good”. The number of people in employment is expected to rise by 425,000 on average over the year, and according to the annual economic report, the unemployment rate is likely to fall by 0.6 percentage points to 5.1 percent in 2022.

Habeck also announced that the social market economy should begin to be developed “gradually in the sense of a social-ecological market economy” this year.

He called the conversion of Germany towards climate neutrality “a task of the century, but also a great opportunity”. Energy must remain affordable and climate protection must be socially cushioned. For this purpose, the financing via the so-called EEG surcharge – i.e. the electricity price surcharge for the expansion of green electricity – will be abolished by 2023 at the latest. Funds from climate funds would then be used.