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Energy crisis and corona consequences: BDI halves growth forecast

2022-06-21T07:47:37.697Z


The Federation of German Industries is much more pessimistic about the growth prospects and expects economic output to increase by only 1.5 percent in 2022. The worst scenario has not yet been priced in.


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Car production in Dresden: »The reduction in Russian gas exports worries us«

Photo: Matthias Rietschel / dpa

The Federation of German Industries (BDI) has more than halved its economic forecast for 2022 due to the double crisis from the Ukraine war and the consequences of the corona pandemic.

The BDI predicted that gross domestic product would only grow by 1.5 percent.

Before Russia attacked Ukraine, the lobby group had expected around 3.5 percent.

"A recovery in the sense of a return to the pre-crisis level is not to be expected until the end of the year at the earliest - quite apart from the fact that we will still be missing three years of trend growth," said BDI President Siegfried Russwurm on the occasion of the Day of German Industry in Berlin.

However, the economy could be even worse if not enough Russian gas were to reach Western Europe.

"We are worried about the reduction in Russian gas exports," Russwurm said.

"An interruption would have catastrophic effects on the manufacturing industry and would inevitably send our economy into recession." The war revealed the "Achilles' heel" of the industrial country Germany, explained Russwurm: security of supply for energy, raw materials and basic technologies.

It doesn't look bad on the books of the companies.

"The order backlog remains at a record high in the industry, and capacity utilization is high," said Russwurm.

“However, due to the existing supply bottlenecks, production is in some cases significantly impaired.” The controversial zero-Covid strategy of Germany’s most important trading partner China is paralyzing global trade.

The lockdowns in China led to production backlogs and disrupted supply chains - and should still be felt in the summer months.

Industry calls for speed in the energy transition

According to the BDI, companies are reluctant to spend in view of the fragile situation.

"Uncertain economic prospects and the increased uncertainty caused by the war are slowing down investment activity in many places," said Russwurm.

“The cost burden is choking companies more and more.” Among other things, a globally competitive electricity price is needed.

The abolition of the so-called EEG surcharge is therefore not enough.

The lobby association also called for the electricity tax and network charges to be reduced significantly.

The BDI President called for the energy transition to be accelerated.

"Security of supply is the top priority, so now priority is given to filling the gas storage tanks instead of generating electricity," said Russwurm.

“So now we need more electricity from coal so that we have full gas storage in winter.” The expansion of wind and solar systems and the connecting power lines must be implemented much faster than before.

Securing new sources of supply and building an infrastructure for liquid gas were also high on the agenda.

Russwurm said on "Deutschlandfunk" that all German companies were in the process of pulling "every lever" to save energy.

Some things go relatively quickly, some don't.

It is currently not possible to say exactly how much can be saved.

All in all, however, it is a “significant contribution”.

The Federal Network Agency wants to proceed cautiously with warning levels

At the end of March, Germany declared the gas early warning level.

The President of the Federal Network Agency, Klaus Müller, apparently sees no rush to declare the third gas emergency level.

"I strongly advocate checking carefully when the right time for the highest alert level is, because that would unleash market forces," says Müller in an interview with Bayerischer Rundfunk.

Therefore, "nothing urges me to do it."

Federal Minister of Economics Robert Habeck has announced extensive measures to reduce gas consumption in view of the cutbacks in Russian deliveries.

The Green politician is expected to attend Industry Day on Tuesday, along with Chancellor Olaf Scholz and Finance Minister Christian Lindner.

The Ministry of Finance, like the companies, sees major economic risks in the coming months, according to its monthly report.

In the near future, therefore, economic development will probably continue to be characterized by the tension between, on the one hand, an industry affected by material shortages and high energy prices, and, on the other hand, positive impulses from the service sector.

In the further course of the year, however, an upward movement is expected in industry, assuming that supply bottlenecks will decrease and that the war will not have any additional significant economic effects.

However, the risks for further development remain considerable, particularly in view of the war in Ukraine.

Tax revenue up in May

The Ministry of Finance was able to report a positive development in federal and state tax revenues.

Despite the difficult situation, these increased significantly in May.

They were ten percent higher than a year earlier and totaled almost 55 billion euros.

In the first five months of the year, tax revenue grew by 15.1 percent to almost 315 billion euros.

According to the ministry report, the higher income is due, among other things, to an economic recovery after the corona restrictions were lifted.

mmq/Reuters/dpa

Source: spiegel

All business articles on 2022-06-21

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