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German government cuts 2022 economic growth forecast to 3.6%

The German government on Wednesday cut its growth forecast for this year, but said that Europe's biggest economy remains “robust” and will return to its pre-pandemic size in 2022.

The Economy Ministry predicted that gross domestic product will grow by 3.6%, down from the 4.1% Germany's previous government forecast in late October.

The picture has been clouded since then by a steep new wave of coronavirus infections fueled by the highly contagious omicron variant.

Containers are handled at a logistic port in Duisburg, Germany, Tuesday, Jan. 25, 2022. Europe's biggest economy, has picked up unexpectedly after a six-month slide, a closely watched survey showed Tuesday. (AP PhotoMartin Meissner)

GDP grew 2.7% last year, according to preliminary official figures, rebounding from a plunge of 4.6% in 2020 when pandemic lockdowns were at their most severe. The government said this year's projected growth will bring it back to its pre-crisis size.

“The consequences of the corona pandemic are still noticeable and many companies still have to struggle with them,” Economy Minister Robert Habeck said in a statement. “Nevertheless, our economy is still robust.”

Germany’s national statistics office has estimated that output in Germany fell by between 0.5% and 1% in last year’s final quarter. Forecasts are also shaky for the current quarter, raising the possibility of a technical recession.

But hopes are high that the picture will improve as the year progresses. On Tuesday, a closely watched survey showed business confidence unexpectedly picking up in January after a six-month slide.

That increase came thanks to a significant improvement in managers' outlook for the next six months, even as their assessment of the current situation worsened.