Germany may face recession due to energy price, claimed reports

BTJ Desk Report
Germany may face recession due to energy price, claimed reports

The economy of Germany is projected to reduce by 0.7% in 2023 as a result of rising energy prices due to the ongoing Ukraine-Russia war, according to media reports.

However, the gross domestic product (GDP) for 2022 is still anticipated to rise by 1.4%, which is 0.7 points less than estimated in June.

Even though adhering to Germany’s constitutional debt brake would be viable in 2023, it may not be possible in 2024, the media reports claimed via a projection of the Kiel Institute, a think tank.

The think tank also projected that the country’s economy to slash by 4 percentage points and predicted inflation to be higher in 2023 at 8.7% compared to 8% in 2022 due to high energy prices.

The debt brake in Germany is a fiscal rule, passed in 2009, which limits structural budget deficits at the federal level and caps the issuance of government debt.

Germany’s energy imports are expected to increase by €123 billion in 2022 and by another €136 billion by 2023, reports said.

The prospects for the world economy also look grim as it is predicted to grow by only 2.9% in 2022 and 2.2% in 2023.

China’s economy is already sliding as a result of its harsh zero-COVID policy and issues in the real estate sector.

The euro area will also fall into recession as negative growth is projected in the current and coming quarters.

While the annual GDP is anticipated to increase by 2.8% in 2022, it may decline in 2023 and show modest growth of 1.6% in 2024, according to the reports.


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