(MENAFN- Trend News Agency)
Germany is set to enter a recession in 2023, with a decline in
gross domestic product (GDP) of 0.4 percent, according to a joint
forecast published by leading economic institutes in the country,
reports citing .
In the spring, the institutes were still predicting that
Europe's largest economy would grow by 3.1 percent. However, the
new forecast 'mainly reflects the extent of the energy crisis,'
according to RWI Leibniz Institute for Economic Research, the Halle
Institute for Economic Research (IWH), the Kiel Institute for the
World Economy, and the ifo Institute.
A 'significant part' of Germany's gas supply has been lost since
the start of the Russia-Ukraine conflict, increasing the risk that
'remaining supply and storage volumes will not be sufficient to
meet demand during the coming winter.'
Gas prices in Europe have tripled, since Russian supplies to
Germany via the Nord Stream 1 pipeline have been repeatedly
reduced, and finally stopped altogether. After explosions caused
four major gas leaks at both Nord Stream 1 and 2, the situation is
unlikely to resolve quickly.
To secure its supply, Germany has been seeking new trade
partners, and is also ramping up its use of coal and nuclear power.
Despite the planned nuclear phase-out at the end of the year,
Minister for Economic Affairs Robert Habeck has retained the option
of operating two nuclear power plants in the first quarter of
Driven by skyrocketing energy prices, inflation in Germany
jumped to a new record of 10 percent in September, according to
preliminary data from the Federal Statistical Office (Destatis).
Rising producer prices and continuing supply chain interruptions
caused by the COVID-19 pandemic have further fueled consumer
Inflation in Germany is expected to rise even further in the
coming months, before averaging 8.8 percent next year, according to
the joint forecast. The European Central Bank's target inflation of
around 2 percent will not be reached before 2024.
'Although the situation is expected to ease somewhat over the
medium term, gas prices are likely to remain well above pre-crisis
levels,' the institutes said, warning that 'this will mean a
permanent loss of prosperity for Germany.'
(1 euro = 0.97 U.S. dollar)
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