Germany’s economy is heading for a slowdown this year, delaying its expected recovery from the coronavirus pandemic, as war in Ukraine pushes up energy and food prices, economists warned on Wednesday.
The Ifo Institute in Munich cut its forecast for gross domestic product growth this year to between 2.2% and 3.1%, down from an earlier forecast of 3.7%. He warned that higher prices would erode consumers’ purchasing power by 6 billion euros in the first quarter.
“The Russian onslaught is slowing the economy due to a combination of significantly higher commodity prices, sanctions, growing bottlenecks in the supply of raw materials and intermediate products, and economic uncertainty. increased,” said Timo Wollmershäuser, head of forecasting at Ifo.
Europe’s largest economy grew by 2.9% last year. Despite contracting in the last three months of 2021, growth was expected to accelerate this year, spurred by the lifting of coronavirus restrictions and an easing of supply bottlenecks in the industry.
However, Germany‘s reliance on Russian imports for much of its energy supply has exposed it to the impact of soaring oil and gas prices.
Ifo said its worst-case scenario was based on oil prices reaching €140 a barrel in May and staying above €120 a barrel by the end of the year, while natural gas prices would reach €200 per MWH in May and remain above €160 per barrel. MWH over the rest of the year.
German consumer prices rose 5.5% from a year earlier in February and economists expect them to continue rising.
The German banking association expects inflation to exceed 7% in the coming months, said Christian Ossig, its chief executive.