Economic outlook when Germany cuts off Russian gas

Leading economic institutes of Virtue stated in a forecast published on April 13 that an immediate halt to Russian energy imports could plunge Germany into a sharp recession in 2023, AFP reported.

Stopping Russian gas imports in mid-April this year will reduce growth for the whole of 2022 by 1.9% and push Germany into a recession in 2023, causing the economy to shrink by 2.2%, according to forecasts. .

The impact of the Russian gas boycott may “never be reversed” over the next two years, the DIW, Ifo, IfW Kiel, IWH and RWI institutes said in a joint statement.

Europe’s largest economy could contract late 2023 to 2024 as energy demand picks up in Europe’s winter before gradually returning to growth.

Even without cutting off Russian gas, Ukraine War is also slowing Germany’s recovery from the economic shock caused by the COVID-19 pandemic, leading German research institutes note.

These organizations lowered their growth forecast for Germany in 2022 to 2.7% from last October’s estimate of 4.8%.

Meanwhile, with the scenario that energy from Russia is still supplied to Germany, Germany’s 2023 growth forecast increases from 1.9% to 3.1%.

Germany is a country that relies heavily on Russian gas for its domestic energy needs and so far has not supported the boycott of Russian gas that neighboring countries Europe called in response to Russia’s military campaign in Ukraine.

Before the war in Ukraine, one-third of Germany’s oil imports, 45% of coal and 55% of German gas imports were supplied by Russia.

Germany has planned to gradually reduce Russian energy imports, accelerate investment in renewable energy and build liquefied natural gas stations to diversify supply.