According to experts, gas embargo should plunge Germany into a “sharp recession” – POLITICO

The war in Ukraine has already dampened Germany’s growth prospects, but a total ban on gas imports from Russia – on which it is heavily dependent – could push the country into recession, according to a report by the country’s leading economic research institutes.

The report, out on Wednesday, estimates that Germany will grow 2.7 percent this year (compared to a fall forecast of 4.8 percent), but will only grow 1.9 percent if gas imports are banned. In 2023, GDP will grow by 3.1 percent but shrink by 2.2 percent in the event of a supply shock, the experts say.

That community diagnosis appears twice a year on behalf of the Federal Ministry of Economics.

“An interruption in gas supplies would lead the German economy into a severe recession,” said Stefan Kooths, Director for Business Cycles and Growth at the Kiel Institute for the World Economy.

Berlin has opposed a ban on Russian gas despite calls from Ukraine, the Baltic countries and Poland who hope to stop Russian President Vladimir Putin’s war on Ukraine. Chancellor Olaf Scholz has said that this would lead to mass poverty in Europe. Wednesday’s forecast will back him up.

The report also said that a sudden halt to gas supplies would jeopardize €220 billion in Germany’s economic output; further fuel inflation to 7.3 percent this year, compared to a baseline of 6.1 percent; and to reduce an expected drop in unemployment this year to 5.2 percent from the current 5 percent.