On Tuesday, the Munich-based Ifo Institute for Economic Research lowered its gross domestic product (GDP) growth forecast for the coming year by 1.4 percentage points and now expects an increase of 3.7 per cent.

However, the economy is expected to grow by 1.4 percentage points more in 2023 than the institute had predicted in the autumn, and increase by 2.9 per cent overall.

“The ongoing supply bottlenecks and the fourth coronavirus wave are noticeably slowing down the German economy,” said Ifo’s head of economic research, Timo Wollmershaeuser. “The initially expected strong recovery for 2022 is being pushed back further.”

Wollmershaeuser believes the coronavirus will have a particularly strong impact in the winter half-year. While he’s more optimistic about the spring, he still sees clear risks, depending on how the infection situation develops.

“Anything is possible,” he said.

Ifo President Clemens Fuest emphasized that anti-coronavirus measures would protect the economy because they would shorten the pandemic and make consumption safer.

Abandoning the rules would make the economic situation worse, he said.

The institute expects inflation to rise further to 3.3 per cent next year after 3.1 per cent in 2021. The rise is driven by increased costs due to supply bottlenecks and a delayed adjustment to higher energy and commodity prices.

During the course of 2022 Wollmershaeuser expects a decline in inflation and then a “reasonably normal increase” of 1.8 per cent in 2023.