Omicron won’t tip Germany into recession but recovery slows, top economists say

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BERLIN (Reuters) – Germany’s strong fourth wave of coronavirus infections and the new Omicron variant are unlikely to tip its economy into recession, although production will now hit its pre-pandemic level later than expected, leading economists told Reuters on Tuesday.

Speaking at an event celebrating the 50th anniversary of Reuters’ German-language news service, the government’s economic policy adviser Monika Schnitzer said the economy is unlikely to return to its pre-crisis size. crisis in the first quarter of 2022 now.

“This could be postponed to the second quarter,” Schnitzer said.

This means that the government’s council of economic advisers will likely have to cut its economic forecast slightly, she added. The council currently predicts that the economy, Europe’s largest, will grow 2.7% this year and 4.6% in 2022.

Schnitzer said she did not expect the government to impose a nationwide lockdown, including vaccinated citizens and that so far it seemed unlikely that the Omicron variant would kill the recovery and push the economy in a recession.

Clemens Fuest, director of the German economic institute Ifo, and Marcel Fratzscher, director of the country’s DIW economic institute, told the same Reuters panel that they also did not expect the economy to shrink. contracts for two consecutive quarters during the winter months.

“I wouldn’t expect a recession now. Instead, we expect stagnation in the fourth quarter, ”Fuest said, adding that the economy would likely grow at a slower pace in early 2022.

German household spending was the sole driver of a weaker-than-expected quarterly economic expansion of 1.7% from July to September, more than offsetting lower business investment due to bottlenecks in the manufacturing sector.

The surge in coronavirus infections in Germany threatens to wipe out the country’s last pillar of growth as it weighs on consumer morale, hurting business prospects during the Christmas shopping season.

Reporting by Michael Nienaber, editing by Catherine Evans

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