Germany headed for recession in 2023, says economy minister

Economy Minister Robert Habeck said Germany's economy would head into recession in 2023 as a result of Russian President Vladimir Putin's economic war on the West.

Habeck told reporters in Berlin that Europe's largest economy would shrink 0.4% next year rather than grow by 2.5% as had been forecast this spring. Growth forecasts for 2022 have also been adjusted downward to 1.4%, from a previous forecast of 2.2%.

"The numbers are bad," said Habeck, though he noted they could have been far worse had the government chosen not to act. He contended that the numbers proved that "the steps we have taken [to protect the economy] have worked."

The Green Party politician pointed to models from this spring that had projected an economic downturn of 3-9% in the event Russia halted gas deliveries.

"I am absolutely convinced that Putin will fail in this attempt [at economic destabilization], just as he is failing on the battlefield in Ukraine," said Habeck.

Nevertheless, Habeck acknowledged the gravity of the situation: "We're going through a serious energy crisis, one that is slowly turning into an economic and social crisis."

Disruptions in gas deliveries from Russia, until now Germany's largest supplier, have weighed heavy on German industry and have pushed food and energy prices ever higher. This in turn has also been driving inflation, which Berlin estimates will average around 8% for 2022, before dropping to 7% in 2023.

Habeck said without the recent passage of a €200 billion ($198 billion) gas relief package, which includes a gas price cap, the damage in 2023 would have been far worse.

He emphasized that energy must be affordable for all and pointed out that Germany's strategic reserves were currently well stocked at 95% of capacity before warning, "Nevertheless, gas is a limited commodity and we need to be frugal with it in order to get through the winter."