A leading think tank has warned that Germany will be heading toward recession next year, as Europe’s biggest economy faces skyrocketing inflation as a result of Russian energy supply cuts.
The Ifo institute’s Monday report asserted that the German economy is to shrink 0.3 percent in 2023, slashing its forecast by four percentage points from a previous prediction in June.
The report noted that Germany’s Inflation is also expected to hit 8.1 percent this year and 9.3 percent next year.
"We are heading into a winter recession," said Timo Wollmershaeuser, Ifo's head of forecasts.
He added, "The cuts in gas supplies from Russia over the summer and the drastic price increases they triggered are wreaking havoc on the economic recovery following the coronavirus."
The think-tank further warned in its report that the forthcoming recession will also lead to a sharp drop in real household incomes and purchasing power.
Russian energy giant Gazprom halted gas deliveries to Europe via the Nord Stream 1 pipeline at the start of September, saying it would be under repair for an unspecified period of time.
The shutdown accentuated an energy crisis in Germany, which has been relying on Russian gas for a long time.
German inflation hit 7.9 percent in August, and earlier this month the government unveiled a new multi-billion-euro relief package to help households cope with soaring prices.
European countries have been accusing Moscow of using energy as a weapon amid tensions over the Ukraine war.
Russia, however, has blamed the United States for triggering the worst gas supply crisis in Europe by pushing European leaders toward the "suicidal" step of imposing sanctions on Moscow over its military offensive in Ukraine.
Last week, Russian Foreign Ministry spokeswoman Maria Zakharova accused the US of being responsible for the energy crisis in Europe on the sidelines of Eastern Economic Forum in the country's Far Eastern port city of Vladivostok.
She said the US had long sought to break energy ties between Russia and major European powers, such as Germany, even though Moscow had been a reliable energy supplier since Soviet times.
Kremlin spokesman Dmitry Peskov has also blamed the EU, UK, and Canadian sanctions for Russia's failure to deliver gas through the Nord Stream 1 pipeline, saying the supplies to Europe via the pipeline would not resume in full until the Western countries reached a collective decision and lifted the sanctions.
Soaring energy prices coupled with runaway inflation have imperiled the livelihood of many Europeans since the war in Ukraine started, prompting the West to impose tough sanctions on Russia, especially its energy sector.
In addition to the Ukraine war, drought and rising temperatures in several parts of Europe have also aggravated the crisis in the continent.
Europe is enforcing measures to cut down on gas usage and, as an alternate source, has also started focusing on nuclear energy.