Ifo Institute expects inflation of up to 6.1 percent
Created: 03/23/2022, 10:40 am
The ifo Institute publishes its new economic forecast.
© Karl-Josef Hildenbrand/dpa
Rapidly rising consumer prices reduce the purchasing power of customers.
Now the war in the Ukraine is taking the tentative momentum out of the economy.
Munich - Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, according to the Ifo Institute.
"We only expect growth of between 2.2 and 3.1 percent this year," said Ifo economic chief Timo Wollmershäuser on Wednesday.
Inflation is likely to rise to between 5.1 and 6.1 percent.
That would be the highest rate since 1982.
Due to the increase in consumer prices, purchasing power of around 6 billion euros will be lost by the end of March alone.
The full order books in industry and the normalization of the pandemic would give the economy a strong boost.
But the war "is dampening the economy through significantly increased raw material prices, the sanctions, increasing supply bottlenecks for raw materials and intermediate products and increased economic uncertainty," said Wollmershäuser.
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Because of the uncertain situation, the Ifo Institute calculated two forecasts.
In the optimistic scenario, the oil price will gradually fall from the current EUR 101 per barrel to EUR 82 by the end of the year, and the price of natural gas will fall at the same time.
In the pessimistic scenario, the oil price rises to EUR 140 per barrel by May and only then falls to EUR 122 at the end of the year.
Energy costs have a strong impact on private consumer spending.
They could rise between 3.7 and 5 percent depending on developments.
In any case, the number of unemployed will probably fall below 2.3 million, predicted the economic researchers.
However, short-time work is likely to increase significantly in the pessimistic scenario.
In the best-case scenario, companies' investment in equipment should increase by 3.9 percent and stagnate in the pessimistic scenario.
dpa
