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City A.M

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Germany’s Economy Faces A €260 Billion Blow As Energy Crunch Persists

  • Russia’s invasion of Ukraine has sparked a dramatic rise in energy prices, especially in Europe.
  • Germany’s economy is on track to lose as much as €260 in added value by the end of the decade.
  • Germany’s price-adjusted gross domestic product will be 1.7 percent lower next year in comparison with expectations of a peaceful Europe,

Germany’s economy will lose over £220bn (€260bn) in added value by the end of the decade, following Russia’s invasion of Ukraine and skyrocketing energy prices – revealing negative effects on the country’s labor market.

According to a study from the Institute of Employment Research (IAB), Germany’s price-adjusted gross domestic product will be 1.7 percent lower next year in comparison with expectations of a peaceful Europe,

The study revealed there will be about 240,000 fewer people employed across the country, with no increase in employment levels until at least 2026.

At this point, financial measures will gradually begin to outweigh the negative effects and lead to a plus of about 60,000 employed by 2030.

European gas prices climbed to new heights this month putting more pressure on the troubled continent (Source: Dutch TTF Futures – ICE)

One of the biggest losers will be the hospitality industry, which was already hit hard by the pandemic and is likely to feel the pinch of consumers’ waning purchasing power.

Energy-intensive sectors, such as the chemical industry and metal production, are also especially likely to be heavily affected, with the country already triggering emergency gas plans and cities rationing energy.

Related; Europe's Energy Crisis Spills Over Into Food

The report also forecast what could happen if the economic situation worsened, amid growing concerns Russia will fully turn off the taps into Europe and deprive the continent of natural gas.

According to the IAB, if energy prices, which have so far spiked 160 percent, were to double again, Germany’s 2023 economic output would be almost four percent lower than it would have been without the war

This would mean 660,000 fewer people would be employed after three years and still 60,000 fewer in 2030.


By City AM

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