German economy expected to grow 3.5% this year – BDI

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BERLIN (Reuters) – German industry association BDI said on Tuesday it expected Europe’s biggest economy to grow 3.5% this year after plunging around 5 % in 2020, but that it could not return to its pre-pandemic level until next year at the earliest.

FILE PHOTO: The skyline with its financial district is pictured at sunset as the spread of the coronavirus disease (COVID-19) continues in Frankfurt, Germany, October 26, 2020, REUTERS/Kai Pfaffenbach

The BDI forecast is less optimistic than government estimates, released in October, in which Berlin predicted a rebound in gross domestic product with an expansion rate of 4.4%.

BDI President Siegfried Russwurm said the economy will not be able to return to its pre-crisis level in 2021 due to the second wave of the pandemic.

“But there should be a good chance he will in the first half of 2022,” Russwurm added.

The Federal Statistical Office will publish a flash estimate of GDP figures for the year 2020 on Thursday. The government will update its GDP growth forecast for 2021 later this month.

BDI said it expects Germany’s export-oriented industrial sector to drive the recovery this year as the global economic outlook for 2021 has improved. The lobby group sees exports jump 6% this year after falling around 11% in 2020.

“The election of Joe Biden as President of the United States paves the way for multilateral solutions and joint initiatives to compete fairly in global markets,” Russwurm said.

“Our businesses will benefit both from China, the engine of global growth, and from the agreement on an investment pact, even if it is not perfect.”

The industry group called on the government to increase public investment in infrastructure over the next decade, cut corporate taxes and cut red tape for companies trying to innovate.

BDI has warned that the new CO2 price could force energy-intensive sectors to relocate to other countries with less stringent climate protection regimes. Berlin should therefore consider a “correction mechanism” to avoid job losses.

Reporting by Michael Nienaber; edited by Thomas Seythal and Nick Macfie

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