Germany – 2021-2022 Scenario: positive jolt followed by accelerated growth

Germany – 2021-2022 Scenario: positive jolt followed by accelerated growth
  • Summary
  • Recent economic trends
  • Outline of our scenario
  • Focus: recovery plan

In summary

The easing of sanitary constraints from the end of May paved the way for an expected surge in growth in Q2. It will be guided by a vigorous rebound in consumption, but also by a return to investment made possible by the recovery of corporate margins. This recovery in activity should enable growth to reach 4% this year before accelerating to 4.7% in 2022.

Germany – 2021-2022 Scenario: positive jolt followed by accelerated growth

The German economic recovery plan is worth €130 billion or 4% of GDP to reboot the economy, invest in new technologies and combat climate change. The aim of the plan is to establish the conditions for lasting productivity gains. The measures in the plan break down into three top priorities. First (50% of spending): boost demand by temporary reductions in VAT, lower electricity bills and provide aid to families with a bonus benefit payment of €300 per child. The German government is also providing subsidies to companies to help cover fixed costs and some of the revenue lost to the pandemic. The second priority (10% of spending under the package) gives the Länder and local authorities a tax relief to offset shortfalls in trade tax and facilitate infrastructure investment. Third, the plan includes major investments to modernise the country and meet climate targets (40% of spending). These measures are strategically planned to lay the groundwork for new export technologies.

Philippe VILAS-BOAS, Economist