Russian invasion of Ukraine will halve German growth in 2022, says IfW Kiel Economic Institute

Russia’s invasion of Ukraine will significantly affect Germany’s economic recovery and will halve the forecast growth of Gross Domestic Product (GDP) in 2022 to 2.1%, the IfW Kiel economic institute said.

The consequences of the conflict should reduce GDP by “about 90,000 million euros [US$ 99,000 millones] this year and next” and “delay to the second semester the return to the pre-COVID-19 level″ of the largest European economy, the economists said.

The previous forecast was for 4% growth this year.

The IfW, the first institute to publish an updated forecast since the Russian invasion of Ukraine, also predicts record inflation of 5.8% in 2022.

“Without the strong growth momentum after the pandemic, the European economy would contract this yearIfW deputy director Stefan Kooths said in a statement.

Germany is benefiting from the “strong recovery effects related to the lifting of most health restrictions”, he added.

“The war is weighing on the economy through greater uncertainty, new tensions in supply chains and a new increase in the price of raw materials”, especially energy, indicated the IfW.

In the automobile sector, the backbone of the German industry and economy, the lack of spare parts produced in Ukraine, for example, has led to production stoppages.

Germany’s GDP, which had limited the effects of the pandemic with a 4.6% recession, grew 2.8% last year, considerably less than in neighboring countries due to supply problems in the industry.