Russian energy embargo could deal big blow to German economy: Bundesbank report

In an intensified crisis scenario, Germany's real gross domestic product (GDP) would decline by just under two per cent in the current year compared with 2021, according to the report, which analyses the possible macroeconomic consequences of an escalation of the Russia-Ukraine conflict, Xinhua news agency reported.

If Germany joined an energy embargo against Russia, its economy could be significantly weakened, says a monthly report published by Germany's central bank Deutsche Bundesbank.

In an intensified crisis scenario, Germany's real gross domestic product (GDP) would decline by just under two per cent in the current year compared with 2021, according to the report, which analyses the possible macroeconomic consequences of an escalation of the Russia-Ukraine conflict, Xinhua news agency reported.

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In this case, Germany's real GDP could, over the short term, be up to five per cent lower than expected in the European Central Bank's (ECB) March forecast, the report found.

Inflation would also "once again surge considerably," the report noted.

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The inflation rate in Germany could be 1.5 percentage points higher in 2022 and two percentage points higher in 2023 than the ECB's estimates.

According to the bank, the main reason is a "significant rise in energy prices in the event of further escalation." However, all the results are "fraught with considerable uncertainty" due to the complex nature of the conflict.

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Germany's inflation rate rose to 7.3 per cent in March, hitting a 40-year high, according to the Federal Statistical Office (Destatis). Prices for household energy and motor fuels were up 39.5 per cent year-on-year.

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