FRANKFURT: The German government on Wednesday lowered its economic growth forecast for 2022 as an Omicron-fuelled surge in coronavirus cases holds back Europe's industrial powerhouse.
The country's gross domestic product is now estimated to expand by 3.6 percent, down from 4.1 percent in a previous forecast.
The start of the year "will still be subdued due to the coronavirus pandemic, especially in the service sectors", the economy ministry said in a report.
But the bounce-back in Europe's biggest economy should "noticeably" pick up pace once infections level off and global supply chain frictions ease over the course of 2022.
The ministry's forecast is more pessimistic than that of the Bundesbank central bank, which is pencilling in 4.2 percent growth this year.
Germany, whose export-oriented economy is particularly vulnerable to the global supply chain bottlenecks and raw material shortages caused by the pandemic, has seen its recovery lag behind other major European economies like France and Italy.
The flagship auto industry has been hardest hit, with giants like Volkswagen, BMW and Daimler forced to trim production at some plants over a shortage of semiconductor chips.
Vaccine mandate
German gross domestic product (GDP) grew by just 2.7 percent in 2021, official data showed earlier this month, well below the expected European Union average of around five percent.
German economy likely shrunk in Q4: Bundesbank
The country of 83 million people reintroduced curbs on public life in recent weeks to tame a resurgence in Covid-cases, including measures that exclude the unvaccinated from restaurants, bars and non-essential shops.
Germany is nevertheless seeing record numbers of new infections blamed on the highly contagious Omicron variant. The country added another 164,000 cases over the past 24 hours -- an all-time high.
German lawmakers will on Wednesday begin debating the introduction of a vaccine mandate for adults.
The measure is backed by new Chancellor Olaf Scholz, whose government replaced Angela Merkel's cabinet last month, but has divided public opinion and sparked street protests.
Economy Minister Robert Habeck said in the report that "an increased vaccination rate should make it possible to sustainably contain the pandemic" this year and "accelerate the economic recovery".
Consumer spending will be a key growth driver, the ministry said, as businesses gradually resume normal service and meet pent-up demand from customers flush with savings.
Industrial firms can also expect to see higher demand for exports as the global recovery from the pandemic shock continues.
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