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Germany fears immediate halt to Russian gas supply will bring recession in 2023

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According to new revised estimates released on Wednesday by the five economic institutes, Ifo (Munich), DIW (Berlin), IfW, IWH (Halle) and RWI (Essen), Germany’s Gross Domestic Product is expected to grow by 2.7 this year. %, compared to an advance of 4.8% previously forecasted, so that in 2023 it will advance by 3.1%. These figures are provided in the baseline scenario developed by the economic institutes.

However, the economic institutes also published a negative scenario, in which there would be a sudden interruption of energy supplies in Russia, a situation in which the German economy would register an advance of 1.9% this year and a contraction of 2.2%. in 2023. According to institute estimates, in the event of a freeze on gas supplies, the cumulative economic losses for 2022 and 2023 could amount to about 220 billion euros, the equivalent of more than 6.5% of economic output.

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“If gas supplies were to be halted, the German economy would go through a severe recession,” said Stefan Kooths, vice president of the Kiel Institute for World Economy.

A possible embargo on Russian gas imports is currently being discussed by EU member states, but Berlin is one of the main opponents of an immediate halt to imports, believing that this will affect economic and social peace in the country. Germany, which before the war depended on Russia for 55% of its natural gas needs, estimates that it will not be able to give up Russian gas until mid-2024, and in late March activated the first phase of the emergency plan to ensure natural gas supply in the context of the threat of stopping Russian supplies.

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The aftermath of the war in Ukraine has led economic institutes to revise their inflation estimates to 6.1% this year and even 7.3% if Russian gas supplies are shut down, which would mean ” the highest value since the founding of the Federal Republic ”. By 2023, the inflation rate would be 5% without Russian gas supplies and 2.8% if supplies are maintained.

The estimates of the economic institutes will be included in the growth forecasts of the Government of Berlin, which will be published at the end of this month.

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