A group of leading economic think tanks slashed its forecast for growth in Germany this year, predicting Wednesday that Europe’s biggest economy will expand by 2.7% as Russia’s war in Ukraine weighs on prospects.
The five institutes’ revised outlook compared with a forecast of 4.8% they made last fall. They forecast an even worse performance if Russian gas supplies are cut off suddenly.
They blamed the war and the “worse than expected course” of the coronavirus pandemic over the winter for Wednesday’s outook revision.
It is the latest in a string of downgrades for Germany’s economic outlook, but is still more optimistic than a recent prediction of 1.8% growth in gross domestic product by the government’s panel of independent economic advisers.
For 2023, the think tanks forecast moderately better growth of 3.1%. The baseline predictions for this year and next assume continuing gas deliveries and “no further economic escalation from the war in Ukraine,” they said.
If energy deliveries are cut off, they forecast growth of 1.9% this year and a contraction of 2.2% in 2023. They said “the cumulative loss of GDP in 2022 and 2023 in the event of a supply freeze is likely to be around 220 billion euros,” or $239 billion.
Germany relies on Russia for about 40% of its natural gas deliveries. The government is working to reduce that dependency, but says it needs time to exit Russian gas altogether and has opposed an immediate stop to supplies.
Last year, Germany’s GDP grew by 2.9%.
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