FRANKFURT: Germany will sink into recession next year and inflation will soar, the government forecast on Wednesday, as Europe’s top economy battles skyrocketing energy prices following Russia’s gas shutdown.

The official predictions were the latest warning that Germany’s economy, which was just getting back on its feet after the pandemic, is set to shrink in 2023 due to the fallout of Moscow’s invasion of Ukraine.

Unveiling the government’s latest forecasts of 0.4pc economic contraction and 7pc inflation for 2023, Economy Minister Robert Habeck painted a dark picture of a “serious energy crisis”.

It “threatens to become an economic and social crisis”, he warned — but insisted that Russian President Vladimir Putin will “fail in this attempt to destabilise the basic economic and political order”.

Putin “will also fail on the battlefield in Ukraine”, he added.

Moscow’s move to cut off gas supplies to Europe amid tensions over Ukraine has triggered an energy crisis across the continent, with consumers and businesses facing high prices as winter approaches.

Germany has been particularly hard hit, as 55pc of its gas supplies came from Moscow prior to the Ukraine conflict.

The soaring energy costs are expected to send inflation to 8pc in 2022 and 7pc in 2023, the government forecast.

Nevertheless, Germany’s economy is still set to register growth of 1.4pc in 2022, according to the government forecasts, after having enjoyed a post-pandemic rebound earlier in the year.

But it will then shrink in 2023, with the economy ministry saying the “central reason” for the downgrade from forecasts earlier this year was “the halt to Russian gas supplies”.

Published in Dawn, October 13th, 2022