German economy projected to grow 3.7 pct in 2022: ifo Institute

The ifo Institute, a research institution based in Munich, on Tuesday lowered its 2022 economic growth forecast for Germany from the previous forecast of 5.1 percent to 3.7 percent next year.

"A strong recovery will set in during the summer in the first half of 2022 when the COVID-19 wave subsides and supply bottlenecks gradually end," said Timo Wollmershaeuser, head of economic research and forecasting at the institute.

"Overall economic production is likely to increase significantly in the second and third quarters of 2022 and slowly move toward average growth rates," Wollmershaeuser said.

The forecast for economic growth in Germany in 2023, on the other hand, was raised by 1.4 percentage points to 2.9 percent. There was a "shift in economic momentum from next year to the year after," the ifo Institute noted.

In terms of inflation, the institute expects a further increase to 3.3 percent next year after 3.1 percent in 2021. Consumer price inflation would not normalize until 2023, when it would fall back to 1.8 percent, according to ifo.

According to the ifo forecast, the unemployment rate in Germany will fall steadily, from an annual average of 5.7 percent this year to 5.2 percent next year and 4.9 percent in 2023.

Germany's budget deficit was projected to fall by around half to 80 billion euros (90.4 billion U.S. dollars) next year. In 2023, the deficit would only amount to 20 billion euros, according to ifo. (1 euro = 1.13 U.S. dollars)