The situation is similar for the euro area as a whole. Eurostat estimates for the first quarter of 2021 point to a decline in real GDP of 0.6 per cent compared to the previous quarter. Since the fourth quarter of 2020 also showed a decline (-0.7 per cent on the previous quarter), this would be a recession by definition. However, given the very positive forecasts for 2021 and 2022, we can hardly speak of a recession. Although the forecast for real GDP has been slightly reduced for the current year, it is still 4.2 per cent (previous month: 4.3 per cent). For 2022, the forecast also remains unchanged at 4.2 per cent.
Economic recovery varies in dynamics
The German economy is expected to recover somewhat less dynamically than the average of the euro area countries. However, German real GDP could still grow more strongly than euro area GDP by the end of 2022 compared to the end of 2019. This is because the pandemic-related economic weakness has so far hit the German economy somewhat less hard than the euro area as a whole. For the end of 2022, German GDP is forecast to be 2.5 per cent higher than at the end of 2019, while the projected increase for the euro area is 1.4 per cent.
No reason to worry about a sustained increase in inflation
The inflation forecasts have also changed only slightly. The inflation rates for both Germany and the euro area have risen significantly, but the forecasts suggest no lasting dynamic upward trend. For Germany, according to estimates by the Federal Statistical Office, the inflation rate for April is 2.0 per cent, 0.3 percentage points higher than in March. For 2021 as a whole, however, the median forecast remains unchanged from the previous month, at 2.1 per cent. In 2022, the inflation rate in Germany is expected to decline again and average 1.5 per cent for the year. Fears of a sharp rise in the inflation rate are thus not confirmed by the forecasts currently available.