Joint Economic Forecast for the German Economy #1-2022 – From the Pandemic to the Energy Crisis – Economy and Politics in Permanent Stress

The German economy is steering through difficult waters. The upward forces due to the abolition of pandemic restrictions, the aftermath of the COVID-19 crisis and the shock waves caused by the war in Ukraine are creating opposing economic currents. What all these influences have in common is their price-driving effect. In the past winter half-year, it was mainly the infection control measures that dampened economic performance. Provided that the war in Ukraine does not escalate economic activity any further, the economic upward forces will gain the upper hand from spring onwards. After a weak start to the year, GDP is likely to increase significantly in the second quarter, but without the burden of the war in Ukraine the increase would be stronger. Overall, however, the recovery process will be delayed once again. Accordingly, the pre-crisis level of economic output will not be reached until the third quarter of the current year. All in all, the institutes expect an increase in GDP of 2.7 percent for this year and 3.1 percent for next year. In the coming year, the German economy will drift into a slight overutilisation of capacity. This is mainly due to the high order backlog in industry and catch-up consumer activity. In the event of an immediate embargo on oil and gas deliveries from Russia to the European Union, on the other hand, the German economy would fall into a sharp recession. In this case, the cumulative loss of overall economic output would probably already amount to around 220 billion € in the two years 2022 and 2023, which corresponds to more than 6.5 percent of annual economic output.