German economists cut growth outlook

The German government's economic advisers slashed their growth forecast for 2022 on Wednesday, warning that the war in Ukraine and soaring energy prices would take a toll on Europe's biggest economy.

The German Council of Economic Experts said it now expected gross domestic product (GDP) to expand by just 1.8 per cent year-on-year, down from an earlier forecast of 4.6 per cent.

"Russia's war of aggression against Ukraine and energy prices are drastically worsening the economic outlook," they said in their latest report.

The experts, whose forecasts are closely watched by Chancellor Olaf Scholz's government, said they saw inflation reaching a decades-high peak of 6.1 per cent in 2022, as energy costs and supply chain disruptions continue to push up prices around the world.

For 2023, the panel sees inflation falling back to 3.4 per cent, while economic output should rebound by 3.6 per cent. Germany is due to unveil its March inflation data later on Wednesday.

The Ukraine conflict has derailed Germany's hopes of finally shaking off the coronavirus pandemic and roaring back to growth.

With its export-oriented industries, Germany has been particularly vulnerable to the supply chain bottlenecks and raw material shortages caused by the pandemic, and its recovery has lagged that of other major European economies like France and Italy.

"The war is putting additional strain on supply chains already strained by the coronavirus pandemic," said panel member Achim Truger.

"At the same time, the prices for natural gas and oil, which have risen sharply once again, are weighing on companies and private consumption."