German growth could miss Bundesbank forecast

Economic growth in Germany could miss projections this year and the resurgence of the coronavirus pandemic may put unexpected strain on the economy in the autumn, the Bundesbank said in a monthly report on Monday.  The Bundesbank said Europe's largest economy is expected to grow by 3.7 per cent this year and 5.2 per cent in 2022, but the opening weeks of the rebound were more timid than estimates and will likely weigh on the full-year figure as well.

Germany is still likely to enjoy strong expansion into the summer months, with services benefiting from the easing of restrictions as infection numbers have declined, leading to increased tourism income. The Bundesbank said that although some restrictions could be reimposed in the autumn, if infections continue to rise, they are unlikely to be as strict as in the past given the progress in vaccinating Germany's population. Happened. But a drop in vaccination pace poses a risk and sentiment indicators are pointing to heightened concern as Europe faces a more contagious delta version of Covid-19.

"Delta varsity and a decline in vaccination dynamics may again lead to stringent protective measures," the Bundesbank said. "This will put more pressure on the economy in the autumn quarter."

The Bundesbank reiterated its earlier view that inflation could reach 5 per cent at the end of the year, well above the European Central Bank's 2 per cent target, but then fall sharply early next year.