The German economy is facing a “slipping into recession” this winter due to Russian invasion of Ukraine, which led to an increase in energy prices, as well as due to the continuing rise in inflation. This is stated in forecast Federal Association of German Banks (BDB), published on Thursday, September 22.
Germany’s gross domestic product (GDP) will grow by 1.4 percent in 2022, according to BDB analysts, but will shrink by 1.3 percent in 2023. “The surge in energy prices has led to a huge increase in costs for companies. High inflation is also leading to a significant loss of purchasing power among consumers,” explained BDB Deputy CEO Henriette Peucker. The long-term effects of the pandemic and the disruption of supply chains continue to have a negative impact on the economy, she said.
In March, following the Russian invasion of Ukraine, the association’s analysts predicted German GDP growth of 2.2 percent in 2022 and 2.9 percent in 2023, Reuters recalls.
GDP will decline until the summer of 2023
The decline in German GDP will continue until the summer of 2023, analysts of the association expect. A possible recovery in economic growth will be “critically” dependent on inflation, the BDB said in a forecast. Prices will rise 8 percent in 2022 and 6.2 percent next year, analysts predict.
“His rate hike in July and September, the European Central Bank made a strong case that fighting inflation is its top priority. However, the 6 percent price increase projected for 2023 will also be well above the inflation target.
Household consumer spending in 2002 will increase by 3.3 percent, and in 2023 will decrease by 1.2 percent, experts expect.
Formerly analysts at the German Institute for World Economics (IfW) in Kiel also predictedthat in 2023 Germany’s GDP could shrink by 0.7 percent. This year, IfW expects GDP growth of 1.4 percent, which is lower than the summer estimate of 2.1 percent. The institute believes that the German economy will return to growth in 2024, when the country’s GDP will increase by 1.7 percent.