BERLIN: Germany's central bank, the Deutsche Bundesbank, has dropped its growth forecast for the country's gross domestic product (GDP) to 1.9 percent in 2022, down from 4.2 percent in December last year.
The bank stated in a statement on Friday that the economic recovery is likely to continue, albeit at a "considerably more sluggish pace" than previously forecast. Uncertainty about future economic developments was "exceptionally high" due to the Russia-Ukraine conflict.
According to the Federal Statistical Office (Destatis), Germany's GDP increased by only 0.2% quarter-on-quarter in the first quarter of 2022. GDP growth was still 0.9 percent lower than it was before the Covid epidemic. "Despite severe global economic conditions, the German economy began 2022 with a tiny increase," Destatis President Georg Thiel said.
The Russia-Ukraine conflict, and the ongoing effects of Covid-19, have "intensified existing imbalances, including supply chain disruptions and higher pricing," according to Thiel. According to Destatis, inflation in Germany reached 7.9% in May, the highest level since the first oil crisis in the winter of 1973-1974. Energy prices increased by 38.3% year over year.
The Bundesbank warned in its prediction that "exceptionally high inflation is projected to increase uncertainty among consumers and weaken their buying power.
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