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Germany on track for recession, high inflation in 2023, central bank says | News | DW

Germany’s economy – Europe’s largest – is heading into a recession that could last into next year, the country’s central bank, the Bundesbank, said in a monthly report on Monday.

“Signs of a recession for the German economy are growing,” the report said.

Gas woes to blame

The central bank pointed to “adverse gas market developments” after Russia shut down the Nord Stream gas pipeline earlier in September.

Germany is trying to reduce its dependence on Russian energy imports. Before the invasion of Ukraine, Russia accounted for 55% of Germany’s gas supply. That number is being reduced, but German industry has warned that shortages could lead to production problems.

Although rationing can be avoided, the Bundesbank said, businesses will nonetheless be forced to reduce or halt production.

“Therefore, economists estimate that the probability of a decline in GDP as we approach the fourth quarter of 2022 and the first quarter of 2023 has increased significantly,” the Bundesbank said.

The worst to come

In the last quarter, the German economy managed to grow by 0.1%.

However, Bundesbank economists predict a slight contraction this quarter, with a more “marked” drop in economic output expected to follow in the last three months of the year and into 2023.

The Bundesbank’s recession forecast aligns with recent analyzes from leading German economic research institutes, including the Munich-based Ifo Institute for Economic Research and the Kiel Institute for the World Economy.

The central bank also warned that inflation could hit double digits in the coming months as prices for services and energy continue to rise. In August, Germany’s annual inflation rate was nearly 8%.

zc/wmr (dpa, AFP, Reuters)