Recession in Germany: OECD collects growth forecasts one after the other

recession in Germany
OECD cashes in rows of growth forecasts

High energy prices – driven by the Russian war against Ukraine – are slowing down economies around the world. Germany is one of the most affected countries. China’s economy will grow more slowly than it has in half a century.

The Organization for Economic Cooperation and Development (OECD) expects a global economic slowdown due to the Russian war of aggression against Ukraine. The global gross domestic product (GDP) will grow by a “modest” 3.0 percent this year and only by 2.2 percent in the coming year, according to the OECD forecast. According to this, Germany will even slip into recession in 2023.

“The war has pushed up energy prices, particularly in Europe,” the OECD report said. This has increased inflationary pressure at a time when the cost of living has already risen sharply worldwide due to the aftermath of the corona pandemic.

In many national economies, companies are therefore passing on their higher energy, transport and personnel costs to customers. “Inflation is now at levels not seen since the 1980s.” According to the OECD, this is forcing central banks to tighten monetary policy more quickly than expected.

“Critical to reduce energy consumption”

According to the OECD, the organization of industrialized nations, Germany will slide into recession in the coming year. Economic output is expected to shrink by 0.7 percent. Germany would therefore be one of the countries most affected. Inflation is also likely to remain at its highest level in decades: the organization expects inflation of 7.5 percent in 2023.

Annual GDP growth will slow down in the USA and the euro area, “several European economies could experience sharper declines during the winter months,” it said. For the euro zone, the OECD expects growth of 3.1 percent this year and – despite Germany’s weakness – 0.3 percent in the coming year. Expectations for the US are 1.5 percent this year and 0.5 percent next year.

Growth has also suffered in China and is expected to drop to 3.2 percent in 2022. Apart from the 2020 pandemic phase, this is the lowest growth rate in China since the 1970s, the OECD emphasized. For the next year, the experts are forecasting a GDP increase of 4.7 percent. The OECD raised Russia’s GDP forecast for 2022 to minus 5.5 percent. The forecast for 2023 was reduced to minus 4.5 percent.

The organization said the economic outlook was subject to significant uncertainty and downside risks. These included the risk of further increases in food and energy prices, which could push many people into poverty. This also included possible bottlenecks in the gas supply in the approaching winter months in the northern hemisphere. “It will be crucial to reduce energy consumption and diversify sources of supply,” warned the OECD.

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