On September 29, local time, the German mainstream economic research institute released a joint report on autumn economic forecasts, which expressed pessimism about Germany’s economic prospects and predicted that the German economy would fall into recession in the second half of 2022 and early 2023.
Many major economic research institutions, such as the Leibniz Institute of Economics, the Yve Institute of Economics and the Kiel World Economic Research Institute, publish economic forecast reports every spring and autumn, as a reference for government economic work and the economic budget of the public utility sector. The report released on the 29th is entitled “Energy Crisis: Inflation, Recession, Loss of Prosperity”. Research institutions believe that the German economy is heading for recession. According to the report, Germany’s GDP is expected to decline by 0.2% in the third quarter, 0.6% by the end of 2022, and 0.4% in the first quarter of 2023. Only 1.4% growth is expected in 2022, while it will decline by 0.4% in 2023.
The spring report released in April predicted that the German economy would grow by 2.7% this year and 3.1% in 2023.
Experts believe that the main reason for the deterioration of Germany’s economic outlook is the decline in natural gas supply. Although the situation may ease in the medium term, natural gas prices will still be much higher than pre-crisis levels. Researchers believe that this means that the German economy will lose its long-term prosperity.
The study also pointed out that the current forecast is based on Germany’s ability to avoid a natural gas shortage in winter. If the temperature this winter is very cold and natural gas reserves cannot meet demand, resulting in natural gas shortages, the German economy may even decline by 7.9% in 2023. If there is a shortage of natural gas, the German economy will continue to shrink by 4.2% in 2024.
Schmidt said that the German economy is being affected by the energy price crisis and high inflation, which has also led to huge losses to consumers’ purchasing power. “Therefore, low-income households and companies rely on further political support from the government.”