FRANKFURT, Germany -The largest economy in Europe, Germany, will experience a recession in 2019, a renowned think-tank predicted on Monday, as Russia’s energy supply cuts will cause inflation to surge.
The Ifo institute has slashed its prognosis for the German economy by four percentage points from a previous prediction made in June, now projecting a 0.3% decline in 2023.
According to the report, inflation would likely reach 8.1 percent this year and 9.3 percent the following.
“We are heading into a winter recession,” said Timo Wollmershaeuser, Ifo’s head of forecasts.
“The cuts in gas supplies from Russia over the summer and the drastic price increases they triggered are wreaking havoc on the economic recovery following the coronavirus.”
The think tank expected that real household earnings and purchasing power would decline significantly.
As per Wollmershaeuser, 2024 will likely see a “return to normal” with 1.8 percent growth and 2.5 percent inflation.
Gas exports to Europe via the key Nord Stream 1 pipeline were stopped at the beginning of September by Russian energy giant Gazprom, which said repairs would take an arbitrary amount of time.
The shutdown exacerbates an energy crisis in Europe and in Germany, which has long been dependent on Russian gas, and with Moscow indicted of utilizing energy as a weapon in the midst of tensions over the Ukraine war.
German inflation reached 7.9% in August, and earlier this month the government launched a new multi-billion-euro relief plan to assist consumers in coping with price inflation.
In an effort to combat the sky-high inflation experienced in the eurozone, the European Central Bank raised interest rates by a record 75 basis points last week and stated that further rises would ensue.
