BERLIN- The economic impact on Germany of Russia’s invasion of Ukraine will last years, influential economist Marcel Fratzscher of the German Institute for Economic Research told Reuters, adding that it could cost 3 percentage points of growth this year.
Fratzscher, whose institute advises the government of Europe’s largest economy on macroeconomic policy, said the impact could last until 2025 when Germany expects to have freed itself from all exposure to Russian gas.
Germany, which for decades prospered from reliable flows of cheap Russian gas, is rushing to reorient itself after the outbreak of war in February.
“The war in Ukraine has done massive damage to the German economy,” Fratzscher said in an interview, adding that perhaps only 1.5 percent would remain of the 4.5 percent economic growth he had expected at the start of the year.
The impact on inflation, through high energy prices, would also be sustained for a similar period, though he rejected suggestions that there was cause for wage restraint.
“Unions aren’t as strong as they were in the 1970s,” he said, noting that this year’s forecast wage growth of 4.5 percent was well short of inflation at some 8 percent. “Even in coming years I see no sign of us falling into a wage spiral.”
The value of German exports jumped by 4.5 percent in June to hit a record level, though economists cautioned that much of the increase was likely due to soaring prices.
Exports rose for a third month in a row, beating forecasts for a 1 percent increase and pushing Germany’s seasonally adjusted trade surplus to 6.4 billion euros ($6.51 billion) in June, well above consensus for a 2.7 billion euro surplus.
Preliminary data last month had shown Germany posting its first trade deficit in more than 30 years, but the May figure of -1.0 billion euros was revised on Wednesday to a surplus of 0.8 billion euros.
The German economy stagnated in the second quarter, with the war in Ukraine, the pandemic and supply disruptions bringing Europe’s largest economy to the edge of a downturn.
The Association of German Chambers of Industry and Commerce (DIHK) warned that Germany’s export-reliant industry faced a difficult second half of the year.
“Supply chain disruptions and high costs for energy, raw materials and imported inputs continue to hamper production,” said DIHK foreign trade expert Carolin Herweg.
“Also, the cooling of the economies of important export partners, such as the United States, China or the euro zone, is also dampening demand for products ‘Made in Germany’.” – Reuters