Originally Posted by
life on mars
Worrying times from FT :
Germany’s economy will shrink next year as soaring energy costs caused by Russia’s throttling of gas supplies reduce disposable income and consumers rein in their spending, according to a leading think-tank.
The Ifo think-tank in Munich warned that the recent surge in electricity and gas prices was “wreaking havoc” on the German economy and would lead to a 0.3 per cent decline in gross domestic product next year — a marked deterioration from an estimate of 3.7 per cent growth, made in June.
The main cause was the expected “decline in private consumer spending” triggered by energy suppliers “markedly adjusting their electricity and gas prices in the light of high procurement costs, especially at the beginning of 2023,” said Ifo.
The downgrade underlines the mood of mounting pessimism about the eurozone’s largest economy.
Last week, the Kiel Institute for the World Economy, another think-tank, slashed its forecast for German GDP next year by 4 percentage points to minus 0.7 per cent, warning: “With the high import prices for energy, an economic avalanche is rolling towards Germany.”
German deputy finance minister Florian Toncar on Monday warned of an “increasing risk of stagflation” in the country, telling the VVW insurance sector publication: “We are experiencing supply-chain problems, production bottlenecks and price increases the likes of which we haven’t seen in decades.”
The government in Berlin recently announced a €65bn relief package to cushion the impact of the energy crisis on households, but Ifo said this would “fall far short of offsetting” the blow to household disposable income, which it predicted would drop sharply.
German inflation would average 9.3 per cent next year, up from 8.1 per cent this year, said Ifo, predicting consumer price growth would peak at 11 per cent in the first quarter, which would be a 70-year high.