Berlin: The Deutsche Bundesbank, Germany’s central bank, has lowered its growth forecast for the country’s gross domestic product (GDP) to 1.9 per cent in 2022 from its previous projection of 4.2 per cent growth in December last year.
Economic recovery is likely to continue but at a “considerably more subdued pace” than previously projected, the bank said in a statement on Friday.
Uncertainty about future economic developments was “exceptionally high” due to the Russia-Ukraine war, reports Xinhua news agency.
In the first quarter of 2022, Germany’s economy barely grew by 0.2 per cent quarter-on-quarter, according to the Federal Statistical Office (Destatis).
GDP growth was still 0.9 per cent below the pre-Covid pandemic level.
“Despite difficult framework conditions in the global economy, the German economy started 2022 with a slight growth,” Destatis President Georg Thiel said.
However, the Russia-Ukraine war and the continuing impact of Covid-19 have “intensified existing distortions, including interruptions in supply chains and rising prices”, Thiel stressed.
Inflation in Germany hit 7.9 per cent in May, the highest level since the first oil crisis in the winter of 1973-1974, according to Destatis.
Energy prices even soared by 38.3 per cent year-on-year.
The “exceptionally high inflation is expected to stoke uncertainty among consumers and will erode their purchasing power”, the Bundesbank said in its outlook.
Households are “likely to spend at least part of the savings accumulated during the coronavirus pandemic on consumption”.