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Ukraine war to almost halve Germany’s 2022 growth

BERLIN (AFP) – Russia’s invasion of Ukraine will have a heavy impact on the German economy, cutting its 2022 growth forecast by almost half to 2.1 per cent, economic institute IfW said yesterday.

“Without the strong post-pandemic boost, German economic output would be in recession in the current year,” said IfW vice president Stefan Kooths.

The war on the edge of the European Union (EU) will cost Germany some EUR90 billion in output for this and next year, said the IfW, the first to issue a forecast since Russia’s assault began on February 24.

“The Ukraine shock will delay the return to pre-coronavirus pandemic levels in the second half,” it said, adding that production capacities will not be fully utilised up to the end of the year as supply chains are broken and demand disrupted.

The German economy was previously forecast to grow by four percent this year. At the same time, Europe’s biggest economy will have to battle a sharp leap in consumer prices that could reach up to 5.8 per cent – a level not seen since German reunification.

Energy prices have leapt since war broke out, forcing the first German companies to take drastic action like idling their plants while consumers are faced with hefty power bills.

Germany had warned of severe consequences on its economy as it joined allies in imposing unprecedented sanctions on Russia, including shutting key banks out of the SWIFT payment network and putting the controversial Nord Stream 2 pipeline on ice.

Numerous German multinationals including Volkswagen have also suspended their business in Russia.