UPDATE 1-Government advisers cut German growth forecasts, see more inflation

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(details, adds background)

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BERLIN, Nov 10 (Businesshala) – Economic advisers to the German government on Wednesday cut their growth forecast for Europe’s biggest economy next year, creating a policy headache for three parties negotiating a new government in Germany. Done.

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The adviser, whose forecasts guide the German government in setting fiscal policy, downgraded its 2021 growth outlook to 2.7%, lower than the 3.1% he expected in March, but lowered his outlook for the next year. increased by six percentage points to 4.6%.

The dark mood blamed by advisors on supply-chain bottlenecks and inflationary pressures ravaging the global economy is more than enough for coalition parties to deliver on promises of transformative investment to green and tough debt payback. Problems are likely to arise. Limit from 2023 without raising taxes.

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The Federal Audit Office warned earlier on Wednesday that the federal government’s finances were in a critical position after two years of pandemic-related spending, and said the next government should consolidate them.

Olaf Scholz’s Social Democrats, who will lead the government if the talks are successful, and the Greens are more relaxed about government spending, but for the business-friendly Free Democrats, fiscal discipline is central to their pitch.

The advisors also said in their report that they expect the current inflationary momentum to continue well into 2022.

Inflation driven by higher input prices will come down to 3.1% this year and 2.6% in 2022. Economic output will grow 4.6% next year, an improvement over the 4% forecast in March.

The government is to respond to the consultants’ report by early 2022. Coalition parties aim to reach a deal by Christmas, three months after Germany’s federal election. (Reporting by Thomas Escrit, Editing by Emma Thomasson and Timothy Heritage)

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