Germany slashes growth forecasts as Ukraine invasion continues

Germany slashed its growth forecast for next year on Wednesday, and hiked its inflation expectations, as energy prices continued to head higher on the back of Russia’s ongoing invasion of Ukraine.

Economy minister Robert Habeck took the wraps off Berlin’s official autumn economic forecasts, predicting a 0.4% contraction for the EU’s largest economy in 2023, with inflation reaching 7%.

Its pick for the current year, meanwhile, was for GDP growth of 1.4%, underpinned by a post-pandemic rebound earlier in 2022, while inflation was estimated at 8%.

Germany’s economy would return to growth in 2024, with a 2.4% rise in GDP pencilled in, after a period of high energy prices acting as a “brake on industrial production”.

“We are currently experiencing a serious energy crisis, which threatens to become an economic and social crisis,” Habeck said.

The German government recently announced a €200bn fund to protect consumers and business customers from volatile and surging prices, including a cap on energy costs.

According to the forecasts, consumer prices would be rising significantly further in 2023 without the energy price cap.

Reporting by Josh White at Sharecast.com.