FRANKFURT: The German central bank said on Monday it was more likely that Europe’s largest economy would contract for a “long period” as Russia curbs the supply of energy to the continent.
“Signs of a recession for the German economy are multiplying,” the Bundesbank said in its monthly report, warning of a “broad and prolonged decline in economic output.”
Above all, the probable downturn is “Supply constraints”, that is, reduced power transmission due to Russia invasion of ukraine
Moscow has reduced the number of supplies of gas to Europe and the Nord Stream pipeline has been closed since late August. This put enormous pressure on the German economy.
Germany relies heavily on Russian energy imports to power its industry and heat its homes, with 55% of its gas coming from Russia before the war.
Germany’s GDP grew by 0.1% between April and June. But a growing number of economic indicators, such as business and consumer confidence, are increasing. start to red
The Bundesbank said the economy was likely to contract “slightly” in the third quarter of the year before falling “marked” in the last three months of 2022 and early 2023.
The cessation of Russian gas supply means the situation in the gas market. “Very tense,” he said.
Germany can “Avoid formal fuel allocations,” but the necessary consumption cuts will allow companies to limit or stop production central bank forecast
The impact is unlikely to be as dire. The “bad situation” the Bundesbank drafted in June. It is forecast that the economy will contract by 3.2% in 2023.
“however The outlook is extremely unstable,” the Bundesbank said.
The decline in gas supply has sent fuel and electricity prices skyrocketing. Spurred decades of high inflation
Consumer prices rose at a 7.9% rate in Germany in August. Which is higher than the target of 2% of the European Central Bank.
