Status: 10/17/2022 10:03 am
The energy crisis in Germany will not go away any time soon, says IMF Vice Gita Gopinath in an interview. And everything must be done to reduce inflation.
According to the deputy director of the International Monetary Fund (IMF), energy prices in Germany will remain high for a long time. Gita Gopinath told the “Handelsblatt”. According to the economist, the energy crisis will not disappear so quickly.
Germany has a larger industrial sector than other countries and, as an industrial nation, is particularly hard hit by the shocks from interrupted supply chains and rapidly increasing energy costs. Gopinath warned: “This winter will be difficult, but the winter of 2023 could be even worse.”
Germany must react to this: The expansion of renewable energies must be significantly accelerated. And it needs energy supplies from other countries that are reliable. “The federal government is working on both, and that is also necessary,” said Gopinath.
Fiscal policy should contribute
Meanwhile, the International Monetary Fund supports Federal Finance Minister Christian Lindner (FDP) in sticking to the reintroduction of the debt brake next year. “I think the finance minister’s approach is correct,” said Gopinath. Inflation is at its highest level in decades. “Everything must be done here to lower inflation,” said the economist. The European Central Bank (ECB) is increasing its interest rates, but financial policy must also make its contribution. “That’s why our advice is to refrain from an expansive fiscal policy.” In Germany, inflation rose to ten percent in September.
The federal government’s previous plan provides for reintroducing the rules on new borrowing that were suspended during the corona pandemic in the coming financial year. The agreed 200 billion euro “defense shield” against the consequences of the energy crisis has therefore been settled as a special fund in the current budget.
Growth forecast revised downwards
The IMF lowered its growth forecast for Germany last week. Germany’s economy will grow by 1.5 percent in the current year – unlike France, Spain and Great Britain, for example, the IMF expects economic output in this country to shrink in 2023, specifically by minus 0.3 percent. The estimate from July was thus reduced by 1.1 percentage points.