BERLIN, March 30 (Reuters) – The German government’s group of economic advisers lowered its growth forecast on Wednesday to take into account the impact of Russia’s invasion of Ukraine.
The “wise men”, whose forecasts are used in the development of the German government’s budgetary policy, now anticipate growth of only 1.8% this year, against 4.6% previously forecast. They specify that the gross domestic product (GDP) will not return to its pre-COVID-19 pandemic level until the third quarter.
For 2023, they predict growth of 3.6%.
“Before the outbreak of the war, the rise in industrial production and the dynamism of the labor market reflected a recovery in the economy. Russian aggression against Ukraine has now considerably worsened the economic situation,” advisers said. in a press release.
The offensive launched by Moscow in Ukraine on February 24 has further weakened supply chains, already damaged by the pandemic, and led to a sharp increase in the price of natural gas and oil, which weighs on businesses and the household consumption, they added.
Advisors therefore expect inflation to accelerate to 6.1% in 2022 before slowing to 3.4% next year.
The “wise men” find it difficult to estimate the economic repercussions of the war in the longer term, explaining that an escalation of the conflict and possible additional sanctions against Russia could have a significantly greater impact on the German and European economies.
“Germany should immediately make every effort to prepare for a possible shutdown of Russian energy supplies and, at the same time, quickly end its dependence on these imports,” said Volker Wieland, member of the committee.
Germany’s energy security could thus be strengthened in the long term even if, for a time, this would imply high energy prices, the economists added. (Report Zuzanna Szymanska, French version Laetitia Volga, edited by Marc Angrand)