In 2023, the gross domestic product of Europe’s largest economy would fall by 2.2% if gas supplies, on which Germany is particularly dependent, were cut off, say these six influential organizations (DIW, IFO, IfW, IWH and RWI). The cumulative loss of GDP over 2022 and 2023 would amount to around €220 billion, or 6.5% of annual wealth, they say.
“If the gas supply fails, the German economy is threatened with a deep recession”comments Stefan Kooths, Vice President of the IfW, in a press release.
Notably, the fall in GDP would be 5% in the second quarter of 2023 before the economy recovers at the end of the year.
A possible embargo on Russian gas is the subject of heated discussions among EU member states, with Berlin being one of the main opponents of an immediate import ban because it believes there is economic and social peace in the country. The consequences of such a shutdown and Germany’s ability to find alternative energy sources in the short term is a matter of debate among economists.
Before 2024, we cannot do without Russia
Berlin, which supplied more than 55% from Russia before the war, has already reduced this share to 40% and is increasingly trying to find more suppliers. Germany plans not to be able to do without Russian gas before mid-2024 and at the end of March activated the first stage of its contingency plan to ensure natural gas supplies in the face of a threatened halt to Russian supplies. .
The institutes generally state that the German economy “crosses difficult waters” and this at a time when the lifting of pandemic-related restrictions may have boosted activity.
supply chains “always full of energy” while new restrictions are hitting China in particular, and the “shockwaves” of the war in Ukraine “Having a negative impact on the economy on both the supply and demand sides‘ they point out.
The fallout from the war in Ukraine is prompting these six institutes to lower their 2022 growth forecast, which is now expected to be 2.7%, from an October estimate of 4.8%. This is also reflected in an expected inflation rate of 6.1% this year, even 7.3% if gas supplies are stopped, ie “highest value since the founding of the Federal Republic”. In 2023, the rate would still be 5.0% without deliveries and 2.8% if it were maintained.