Energy crisis especially severe for Germany, 2023 possibly “even harder” - IMF
Germany’s economy will take a bigger hit from the energy crisis compared to other European countries, according to the International Monetary Fund (IMF), business daily Handelsblatt reports. According to IMF estimates, the crisis will continue past this winter and might see the German economy shrink by 0.3 percent next year. “This winter will be hard, but the winter in 2023 could be even harder. The energy crisis won’t go away quickly, and energy prices will remain high for a long time,” IWF vice president Gita Gopinath told Handelsblatt in an interview, adding that inflation is higher than it has been in decades and everything possible should be done to lower it.
The energy crisis is especially severe for Germany as an industrial location, Gopinath said. The sector has had to deal with pandemic-related supply chain issues and now fights skyrocketing energy prices. To prevent deindustrialisation, Germany must respond to these challenges, she argued. “The expansion of renewable energies must be accelerated significantly, and Germany needs energy supplies from other countries that are reliable.” To fight inflation, the IMF believes the European and US central banks should continue to raise interest rates. Gopinath said ending expansive fiscal policy and complying with the debt brake, as proposed by Free Democrat (FDP) finance minister Christian Lindner, was right for Germany.
The German government already had warned the energy crisis will likely push the country into a recession in 2023, as rising energy prices put a damper on industrial production and inflation means citizens will buy less. The economy minister, Robert Habeck, has called for massive investments into climate neutrality and structural reforms like speeding up planning procedures as key measures to get out of the crisis.