“Reductions in gas supply from Russia during the summer and the drastic rises in prices that they provoked havoc in the economy“, summed up the IFO institute on Monday, one of the most influential in the leading European economy.
The agency reduced its growth forecast made in June by four percentage points, and now forecasts a decline of 0.3% in Gross Domestic Product (GDP) in 2023. It is the first institute in Germany to forecast a drop in GDP next year.
The IFO predicts a technical recession in the first quarter of 2023, with a 0.4% drop in GDP, after a 0.2% decline in the fourth quarter of 2022.
The day before, the president of the influential German central bank, Joachim Nagelhas already released a similar forecast, stating that a recession was “possible” later this year and early 2023. “There are a number of elements” that point to this hypothesis, he said on public radio.
According to the IFO, the situation could “normalize” in 2024 with a “growth of 1.8%”. “Let’s go to a winter recession“, summarized Timo Wollmershäuser, director of conjunctural studies of this institute.
Refering to inflation, should reach 9.3% next year, after reaching 8.1% in 2022, according to the agency. The Bundesbank forecasts inflation to “more than 10%” in December, and to “more than 6%” in 2023.
The Russian invasion of Ukraine and the sanctions imposed by the European Union to Moscow have made the Russian giant Gazprom drastically reduce its gas deliveries to Germany until supply is completely cut off in September.
Germany, highly dependent on gas from Russia, now has to look for other, much more expensive suppliers. This situation has triggered the price of gas and the electricity in the country, which was already very high in full economic recovery after the covid-19 pandemic.
Source: Ambito
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