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The main reason for the gloomy forecasts is the large reduction of gas supplies from Russia, which may even be completely cut off. On Thursday the German government declared a state of alert regarding gas reserves. “Rising energy prices and a shortage of gas are causing great concern for the German economy,” said Clemens Fuest, director of the Ifo Institute. According to him and other economists, Germany could be involved in an economic crisis.
Severe recession in winter
According to economists at the Ifo Institute, the Russian occupation of Ukraine is causing rising commodity prices, rising supply shortages and growing uncertainty between companies and consumers. The Ifo institute has therefore lowered its forecast for German economic growth this year from 3.1 to 2.5 percent.
For next year, economic growth is expected to accelerate to 3.7 percent, however economists fear a severe recession in the winter if there will be no Russian gas supplies. “The situation in the gas market is threatening,” said Jens Südekum, a German government adviser and professor of international economics at Heinrich Heine University in Düsseldorf. “If Russian gas supplies are cut off, there is a risk of gas rationing and cessation of industrial production. The result could be a severe recession. ” – said Jens Südekum.
Not just Russian gas
According to Commerzbank economist Jërrg Krämer, the economic situation is worse than the Ifo Institute predicts: “The economic situation is volatile. On the one hand because further reduction of Russian gas supplies could lead to gas rationing for the industry which will be with serious consequences. On the other hand, even the massive rise in interest rates by the US Federal Reserve is likely to trigger a recession in the US. “Given all these growing risks, we have lowered our forecast for Germany for 2023 from 2.5 to just 1.0 percent.” – said Krämer./ dw
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