FRANKFURT — The German government’s council of economic advisers drastically reduced its growth projections, pointing to Russia’s war on Ukraine and surging energy prices.
The eurozone’s largest economy is now expected to grow by 1.8 percent this year, after a previous forecast of 4.6 percent. The council said Germany’s economy is now unlikely to reach pre-pandemic levels before the third quarter.
For next year, advisers put GDP growth at 3.6 percent.
Inflation is expected to climb to 6.1 percent this year, more than three times the European Central Bank’s price stability target, before declining to 3.4 percent in 2023.
The outlook is subject to very high uncertainty. Further intensification of the conflict in Ukraine and an expansion of sanctions against Russian entities could put significant additional strain on the German and European economies, the council cautioned.
“Germany is heavily dependent on Russian energy supplies. A suspension of these supplies entails the risk that the German economy slides into a recession with significantly higher inflation rates,” said council member Monika Schnitzer.