War threatens lasting risks for Germany’s economy

Significance

The impact of the war in Ukraine, and Western sanctions on Russia, is already harming the economy through higher energy and consumer prices plus trade disruption. The German Council of Economic Experts (GCEE) has cut its 2022 GDP forecast to 1.8% from 4.6% previously.

Impacts

• Disruptions to vital imports will reduce the supply of vehicles, especially electric ones.
• Growing geopolitical risks and the prospect of deglobalisation threaten the long-term sustainability of Germany’s economic model.
• Commodity prices will remain high throughout 2022, resulting in persistently higher prices from businesses and households.