On Monday, the Bundesbank published an even more pessimistic prediction for the German economy.
The bank indicated in its August monthly report that a reduction in economic output in the winter had become increasingly likely.
Unfavorable changes in the gas market, according to bank analysts, will have a negative influence on economic development in Germany in the summer quarter and beyond.
From July to September 2022, the bank forecasts no increase in Germany’s GDP.
The Federal Statistics Office had previously forecast that GDP would stay flat in the second quarter compared to the first.
Next Thursday, the office is anticipated to provide full data for the period April to June.
According to the Bundesbank, the high level of uncertainty about gas supplies in the coming winter, combined with quick price increases, will put enormous strain on families and businesses.
The bank now anticipates that German inflation will reach the 10 percent target in the autumn. Energy costs rose as a result of the Ukraine war, while increasing food prices pushed up inflation for months.
The bank, on the other hand, said that removing Corona restrictions would boost private consumption.
Furthermore, recent figures suggest that, to the maximum degree feasible, industry and foreign commerce have resisted negative reasons, but the possibility of a GDP decrease in the coming winter has increased considerably due to unfavourable developments in the gas market.
According to data, the public finances of the German states are in a strong position to offer economic stability even in the event of a negative trend. Economic development is stifled by a financial crisis.
It should be noted that the rules for lowering public debt established in the German constitution in 2009 enable the government to borrow to a limited amount, and the administration resorted to suspending the curb rules in 2020 and 2021 owing to the difficulties caused by the battle against the Corona epidemic.
The German Central Bank predicts a winter economic downturn.
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