Gas embargo to plunge Germany into ‘sharp recession,’ according to experts
The war in Ukraine has already dampened Germany’s growth prospects, but a full ban on gas imports from Russia — on which it is heavily dependent — could send the country into recession, according to a report from the country’s top economic research institutions.
The report, out Wednesday, estimates that Germany will grow by 2.7 percent this year (compared with a fall forecast of 4.8 percent), but grow by only 1.9 percent if gas imports are banned. In 2023 GDP will grow by 3.1 percent, but shrink by 2.2 percent in case of a supply shock, the experts say.
The Joint Economic Forecast is published twice a year on behalf of the German economy ministry.
“If gas supplies were to be cut off, the German economy would undergo a sharp recession,” said Stefan Kooths, director of business cycles and growth at the Kiel Institute for the World Economy.
Berlin has opposed a ban on Russian gas despite calls from Ukraine, Baltic countries and Poland, which hope to halt Russian President Vladimir Putin’s war on Ukraine. German Chancellor Olaf Scholz has said that it would cause mass poverty in Europe. Wednesday’s’s forecast will give him backing.
The report also said that a sudden halt in gas supplies would endanger €220 billion in German economic output; further fuel inflation to 7.3 percent this year, compared with a baseline scenario of 6.1 percent; and reduce a contraction in unemployment expected this year from 5 percent currently to 5.2 percent.