Economic growth: IMF lowers forecast for Germany

The economy in Germany will probably grow more slowly than expected because of the energy crisis. The International Monetary Fund only expects an increase of 1.2 percent. And the trend is likely to continue.

At the beginning of the year, the economy in Germany still looked good, emphasizes the International Monetary Fund (IMF). But the consequences of the Russian invasion of Ukraine would have fundamentally changed the situation. The IMF lowers its growth forecast for Germany, significantly.

This year and next will be a challenge for the German economy, said IMF Germany expert Oya Celasun in Washington. She and her team expect only 1.2 percent growth for this year. In May, the IMF was still assuming two percent growth for the Federal Republic.

Biggest problem: unclear gas deliveries

According to the International Monetary Fund, the growth rate is likely to fall further next year, to 0.8 percent. The reason is the consequences of the Ukraine war, above all the uncertainties in the energy supply and raw materials that have become more expensive. The greatest threat to the German economy lies in the fact that it is not clear whether the Russian leadership will continue to supply gas to Germany, said IMF analyst Oya Celasun.

If no more Russian gas flows to Germany, it will damage the German economy in a considerable way – and inflation will then continue to rise.

Suspend debt brake?

The IMF experts expect more “fiscal policy flexibility” from the federal government in order to help the economy. Federal Finance Minister Christian Lindner will not be happy to hear it, but the International Monetary Fund also expects that the federal government will have to suspend the debt brake again in order to deal with the consequences of the impending economic crisis.

The IMF welcomes the fact that the federal government is making efforts to increase the expansion of renewable energies. Even more speed is needed for investments in the direction of a green economy. That will help the economy.