The government has downgraded its economic growth projections for the current year, signalling a deeper-than-expected economic crisis and slower recovery, according to their revised autumn forecast published on Wednesday.
While the government’s spring projection predicted mild growth of 0.4%, the revised autumn forecast anticipates a contraction of 0.4%. The government also downgraded its forecast for the next year, now expecting growth of 1.3% rather than 1.6%.
“We’re recovering more slowly from the crisis than expected in a difficult geopolitical situation,” Economy Minister Robert Habeck (Greens) said in a statement.
The economy minister blamed economic problems on Germany’s disproportionate exposure to the consequences of Russia’s invasion of Ukraine due to its previous dependence on Russian gas.
“What we’re experiencing in 2023 still ultimately goes back to Vladimir Putin’s attack: the high energy prices due to the lack of Russian gas disrupted global market relations and high inflation, which is being tackled by the ECB with high-interest rates,” Habeck told reporters in Berlin.
This coincides with predictions of the International Monetary Fund (IMF), published on Tuesday, and of the European Commission. Both had lowered their expectations in their recent forecasts and singled Germany out as the only larger economy to shrink in 2023.
Habeck had previously objected to “badmouthing” the economy’s longer-term prospects, saying the government was solving problems at an unprecedented speed.
In contrast, Finance Minister Christian Lindner, leader of the pro-market FDP, the smallest coalition partner in the government coalition, commented on the IMF forecast with a warning that current measures were insufficient to “find new sources of wealth”.
As a short-term fix, Habeck is pushing for electricity-price subsidies for energy-intensive industries, but the matter remains controversial within the coalition government, as Chancellor Olaf Scholz (SPD/S&D) holds that subsidies would reduce incentives for German businesses to innovate.
Habeck said the chances for new subsidies “are fifty-fifty” on Wednesday.
(Nick Alipour | Euractiv.de)
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