The new forecast released Wednesday was more pessimistic than most previous economic studies and could cover Chancellor Olaf Solz’s government to reject calls for an immediate ban on Russian oil and gas imports, on which Germany relies. to a large extent. The EU agreed last week to ban coal imports from Russia from August. Some Member States have asked the bloc to go further by banning oil and gas imports, but Berlin has resisted such a move, arguing that it would be very economically detrimental to German business and consumers. Five of Germany’s top economic research institutes have predicted that if all energy supplies from Russia are cut off immediately, growth in Europe’s largest economy will slow sharply from 2.9 percent last year to 1.9 percent this year, before shrinking by 2.2 percent in 2023. “If the gas supply is cut off, the German economy will be in a sharp recession,” said Stefan Kooths, vice-president of the Kiel Institute for Global Economy. The projected contraction will be less severe than the 4.6 percent drop in GDP caused by the effects of the coronavirus pandemic in 2020. However, economists say the cumulative impact in two years will be greater. “You can also calculate it as follows: Germany will lose 220 billion euros in economic output in 2022 and 2023, which is equivalent to 6.5 percent of GDP,” Kooths added. Marcel Fratzscher, head of the German Institute for Economic Research, said a direct Russian energy embargo “would have a much longer-term impact and cause more collateral damage to the economy than a pandemic if people were rehired fast enough.” “The main concern is that this will permanently erode the competitiveness of German industry, especially in sectors such as chemicals, but also steel and fertilizer production,” Fratzscher told the Financial Times. The institutes predict that the immediate cessation of Russian energy imports will increase the number of unemployed in Germany from 2.37 million this year to 2.79 million next year. Inflation will hit a full-year high of 7.3 percent in 2022, before falling to 5 percent next year, they estimated.

Pressure is mounting on the government after three German lawmakers chairing parliamentary committees on foreign affairs, defense and Europe called for an embargo on Russian oil as soon as possible after a visit to Ukraine on Tuesday. However, a poll by the Allensbach Institute published on Wednesday found that 30 percent of Germans supported an immediate ban on all Russian energy imports and only 24 percent agreed with the statement: “We can freeze for freedom. ». Half of Germany’s gas and thermal coal imports last year came from Russia, which also supplies a third of the country’s oil imports. Berlin plans to diversify from Russian oil by the end of this year and from gas in two years. Even as Russian oil and gas imports continue to flow, the institutes said Russia’s invasion of Ukraine, supply chain bottlenecks caused by the pandemic and rising inflation would weigh on production. They cut their key German growth forecast for this year to 2.7 percent – lower than their October forecast of 4.8 percent. The new forecasts were submitted to the government by the German Institute for Economic Research, the Ifo Institute, the Kiel Institute for Global Economy, the Halle Institute for Economic Research and RWI. Previous studies, including those published by the German National Academy of Sciences Leopoldina and Econtribute, have suggested that cutting off Russian energy supplies would be “manageable” for the economy and would hit 0.5% to 3% of Germany’s GDP.

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