The German economy would take a big hit in the event of a Russian gas supply halt, German institutes have warned.
According to a joint economic forecast by five leading German economic research institutes, in the event of an immediate interruption to Russian gas supplies, a total of 220 billion euros ($238 billion) in German economic output would be at risk in both 2022 and 2023. This would be equivalent to more than 6.5% of Germany’s annual economic output.
"If gas supplies were to be cut off, the German economy would undergo a sharp recession," said Stefan Kooths, vice president and research director for business cycles and growth at the Kiel Institute for the World Economy.
The institutes slashed GDP growth for 2022 to 2.7% from 4.8% due to the ongoing war in Ukraine and its economic ramifications and expect inflation to hit 6.1% in 2022, the highest figure in 40 years.
"In the event of an energy supply stop, it would even increase to 7.3 percent, a record-high in post-war Germany," the press release reads.
At the end of March, Germany issued an "early warning" of possible natural gas shortages over a payments dispute with Russia that could lead to energy rationing, urging all consumers to reduce their usage as much as possible.
"The recovery process in the German economy is once again being delayed. The economic picture is shaped by opposing forces, all of which are driving up prices," said Kooths.
The Joint Economic Forecast was prepared by the German Institute for Economic Research (DIW Berlin), the ifo Institute (Munich), the Kiel Institute for the World Economy (IfW Kiel), the Halle Institute for Economic Research (IWH), and RWI (Essen), CNN reports.
