“Double crisis”: Industry association BDI drastically lowers economic forecast

The Federation of German Industries has drastically lowered its economic forecast for this year. Growth in economic output in Germany is only expected to be around 1.5 percent, as the BDI announced in Berlin on Tuesday.

At the beginning of the year, before the start of the Russian war of aggression in Ukraine, the industry had assumed an increase of around 3.5 percent for 2022. “The double crisis of the Russian invasion of Ukraine and the effects of the Covid pandemic are causing problems for the industry,” said BDI President Siegfried Russwurm.

Chancellor Olaf Scholz and, among others, Finance Minister Christian Lindner and Economics Minister Robert Habeck are expected at an industry day on Tuesday. Habeck had announced extensive measures to reduce gas consumption in view of the throttling of Russian deliveries.

Fears of a possible recession are growing

Russwurm expects a recovery in the sense of a return to the pre-crisis level before the corona pandemic at the end of the year at the earliest. The prerequisite is that Russian gas continues to reach Western Europe. “An interruption would have catastrophic effects on the manufacturing industry and would inevitably send our economy into recession,” said Russwurm.

The company’s order backlog is at a record high. However, due to delivery bottlenecks, production is sometimes significantly affected. Uncertain economic prospects and increased uncertainty due to the war also slowed companies’ investment activity.

The war revealed the “Achilles’ heel” of the industrial country Germany: security of supply for energy, raw materials and basic technologies. With a view to the high inflation driven by the sharp rise in energy prices and raw materials, Russwurm said: “The cost burden is increasingly suffocating companies.” He called on the federal government to significantly reduce the electricity tax and network charges.