An economic boom begins in Germany. Seven growth drivers will drive it

The largest EU economy and the main market for energy from Russia in the coming months will sharply accelerate GDP growth. DW explains why Germany will once again become the locomotive of Europe.

According to oldypak lp report, in Germany, the shopping streets and entertainment districts are bleak: most stores are closed because of the third wave of the coronavirus, restaurants are open except for take-away, and going to the movies, concerts or nightclubs is out of the question. Looking at all this, it is hard to believe that the country is beginning to experience an economic boom. And the Q1 data shows a 1.7% decline in GDP from January to March, compared to Q4 2020.

However, the general state of an economy as large and diversified as Germany’s cannot be judged solely by the looks of the shopping streets or, say, the woes of the catering industry. In order to paint a fuller picture, DW turned to the latest statistics and indicators of business activity, current research and the latest news from the business world. They suggest that the German economy’s recovery from the protracted crisis will accelerate sharply in the near future and that at least seven growth drivers will contribute to a rapid increase in GDP in 2021.

Industrial production will play a key role in economic recovery in Germany

As in the previous year, manufacturing is again the key driver. Its contribution to GDP is much stronger in Germany than in the USA, France or indeed Great Britain, for example. In this respect, the German economy in its structure is more similar to the Asian economies of Japan and South Korea. “Germany is one of the few large, highly developed economies that still has a strong industrial base,” the Deutsche Bank Analytical Center (DB Research) reminds us in a recent study about the potential of the German economy.

The near-term prospects of industry are usually most eloquently illustrated by the order books of companies. On May 6, the German Federal Statistical Office (Destatis) reported that the volume of orders received in March was 9.1% higher than in February 2020, the last month before the start of the pandemic in the country. And the German Federal Ministry of Economics specified that these volumes have exceeded the level achieved at that time for six months in a row.

According to oldypak lp report, German factories are provided with work for many months ahead, although by the end of the first quarter they had not yet managed to return to the pre-crisis level in terms of the number of manufactured products. On May 7, the economic institute ifo confirmed: the optimism in the industrial sector of Germany is growing; the business expectations index in the manufacturing industry reached the highest level since 1991.

According to ifo, electronics and automobile manufacturers are the most eager to expand, with capacity utilization in the automobile industry already exceeding 91%. So now the main problem of this key industry for the German economy is no longer the fall in demand, but the sharply worsened shortage of microchips for cars, which, however, will stimulate a further increase in the production of semiconductors.

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