Joint Economic Forecast for the German Economy #2-2022 – Energy Crisis: Inflation, Recession, Loss of Prosperity

The study contains a detailed short-term forecast up to 2024 and a medium-term projection of economic development up to 2027. The main topic deals with the economic consequences of a gas shortage in Germany. The crisis on the gas markets is having a severe impact on the German economy. Reduced gas supplies from Russia have eliminated a significant part of the supply and also increased the risk that the remaining supply and storage volumes will not be sufficient to meet demand in winter. Gas prices soared in the summer months, and forward markets also showed significantly higher prices for a longer period. The resulting sharp rise in consumer prices is reducing the purchasing power of private households in particular. Economic output is already expected to have fallen slightly in the third quarter. A significant decline is expected in the winter half-year. The fact that this will not be even more severe is due to the high order backlog in the manufacturing sector. Overall, production is expected to expand by 1.4 percent this year despite the decline in the second half of the year. The institutes have thus almost halved their spring forecast for this year. For the coming year, gross domestic product is expected to decline by an annual average of 0.4 percent. In the spring, the institutes still expected an increase of 3.1 percent. This revision reflects the extent of the energy crisis. In 2024, GDP will expand by an annual average of 1.9 percent. The rate of inflation is likely to increase further in the coming months. At 8.8 percent, the annual average inflation rate for 2023 is slightly higher than the current year's figure (8.4 percent). The 2 percent mark will not be gradually reached again until 2024.