Germany's GDP growth forecast halved due to Ukraine crisis

The annual inflation rate in Germany is expected to rise to 5.8% in 2022, the highest since the country's reunification more than 30 years ago, according to the institute's "Spring Forecast". The Ukraine crisis "delays the return to pre-Covid-19 levels into the second half of the year" and is "putting a noticeable strain on the German economy and increases the already strong inflationary pressure", Xinhua news agency quoted IfW Kiel.

The Kiel Institute for the World Economy (IfW Kiel) almost halved its forecast for Germany's gross domestic product (GDP) growth in 2022 from 4 per cent to 2.1 per cent.

The annual inflation rate in Germany is expected to rise to 5.8 per cent in 2022, the highest since the country's reunification more than 30 years ago, according to the institute's "Spring Forecast".

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The Ukraine crisis "delays the return to pre-Covid-19 levels into the second half of the year" and is "putting a noticeable strain on the German economy and increases the already strong inflationary pressure", Xinhua news agency quoted IfW Kiel as saying.

The economic turmoil caused by the Ukraine crisis is likely to cost Germany around 90 billion euros ($99 billion) in economic output this year and next, according to the institute.

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"The economy in Germany and worldwide is subject to opposing forces," said Stefan Kooths, head of economic forecast and vice president of IfW Kiel.

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"The strong upward and catch-up effects following the removal of most Covid-19 infection control measures" are offset by the shock waves resulting from the Ukraine crisis, he said.

Production capacity in Germany is projected to remain underutilized until the end of the year and economic output will therefore "remain below potential".

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However, economic recovery is not breaking off and IfW Kiel expects GDP growth to reach 3.5 per cent in 2023.

In 2022, GDP is expected by the institute to increase by 2.8 per cent in the eurozone, by 3.1 perc ent in the US.

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