Europe’s biggest economy is taking its worst hit since the 1979-81 oil crisis, according to a study
The German economy is expected to lose billions of euros by the end of 2023 due to skyrocketing energy prices, the Ifo Center for Macroeconomics said in a report published on Tuesday.
According to the forecast, real income loss will reach €110 billion ($110 billion) during the 2021-2023 period, which equals 3% of Germany’s annual economic output.
“The only time this figure was higher was during the second oil crisis of 1979-81, when the loss in economic output was 4%,” said Timo Wollmershaeuser, senior economist at Ifo.
The surge in energy prices is expected to take a heavy toll on the German economy this year, with an anticipated €64 billion loss, or 1.8% of the country’s output. The estimated loss for 2021 exceeded €35 billion, and a €9 billion drop is expected for 2023, according to Ifo.
German citizens will continue to feel the impact of the energy crisis over the next few years with a drop in real incomes, Wollmershaeuser warned, adding that losing Russia as the main energy supplier will result in long-term high oil and gas prices.
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He also predicted that Germany will not wean itself off energy imports “overnight” as the country has long been dependent on external supplies.