The economy is projected to grow by 1.9% in 2022 and 1.7% in 2023, with the recovery hampered by the war in Ukraine, and an embargo on Russian oil. Rising inflation is reducing household purchasing power, damping the rebound of private consumption. Investor and consumer confidence have collapsed and supply chain bottlenecks have worsened, postponing the recovery of industrial production and exports towards the end of 2022, despite a large order backlog. The recovery could be further derailed by a sudden stop of gas imports from Russia or more persistent lockdowns in China.
The pandemic is likely to accelerate digitalisation with new business models and increases in demand for teleworking, telehealth services and remote learning. The energy transition requires changes in behaviour, consumption and production. In order to face these challenges while supporting the recovery, Germany needs to boost investment in infrastructure and knowledge-based capital, revive business dynamics and address skills bottlenecks.
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2021 Structural Reform Priorities