Fourth Covid wave blocks German recovery. Think tank cuts growth forecasts for EU’s largest economic country.

A think tank has predicted that Germany’s economy growth will slow in the next year.

The Ifo institute downgraded its forecast for growth in Europe’s biggest economy in 2022 to 3.7 per cent from an earlier estimate of 5.1 per cent.

Timo Wollmershauser at Ifo said: ‘Supply bottlenecks and the fourth wave of the coronavirus are noticeably slowing down the German economy.’

Shut down: Germany has been battling a fourth wave of Covid, with businesses in some areas such as Leipzig (pictured)  forced to close early

A shortage of raw materials, ranging from wood and semiconductors, has particularly affected a production-intensive economy. 

Germany is also fighting a fourth wave Covid. Businesses in certain areas have been forced to close and people who are not vaccinated were barred from shops.

As the new government seeks to jumpstart the economy by making massive investments into digitalisation and climate project, the forecast could prove to be an issue.

Ifo stated that the German GDP would contract by 0.5% during the last quarter 2021. The growth rate for the whole of 2021 is 2.5%

This contrasts starkly with the UK where, according to IMF forecasts, growth will be 6.8% in 2017 and 5.0% in 2022.

Elsewhere, Kristalina Georgieva, head of the IMF has said that Britain has proved ‘more resilient than expected’.

She said the UK had ‘advanced in many respects versus this time last year’ – despite warnings in 2020 that growth could suffer when Britain split from the EU.

This optimism came despite Omicron worries. Mrs Georgieva praised Britain’s vaccination roll-out. She said: ‘The foundation for this resilience came from a rapid vaccination campaign, and strong coordinated policy support.’