WASHINGTON, DC — Germany and Italy will slip into recession next
year, becoming the first advanced economies to contract in the wake of Russia’s
invasion of Ukraine, an
International Monetary Fund (IMF) forecast showed on
Tuesday.
اضافة اعلان
While the
eurozone will avoid a recession, the output of the 19-nation single currency
area will slow sharply, eking out 0.5 percent growth — worse than previously
forecast by the IMF.
The war on
Europe’s eastern flank has sent inflation soaring higher as energy prices have
jumped, forcing the European Central Bank to hike interest rates to cool the
economy, at the risk of precipitating a contraction.
Germany —
Europe’s biggest economy — has paid dearly for its heavy reliance on gas from
Russia, which cut supplies to Europe in suspected retaliation for Western
sanctions over the conflict.
The German
economy is now expected to shrink by 0.3 percent in 2023, the IMF said in an
update to its World Economic Outlook from July, which had forecast 0.8 percent
growth for the country.
Italy, whose
industries are also dependent on gas imports, will see its gross domestic
product contract by 0.2 percent — also a sharp downgrade from 0.9 percent
growth July.
Germany and
Italy are the only advanced economies seen going into recession next year in
the revised outlook of the IMF.
“Weak 2023
growth across
Europe reflects spillover effects from the war in Ukraine, with
especially sharp downward revisions for economies most exposed to the Russian
gas supply cuts,” the IMF said.
The report also
cited the “tighter financial conditions, with the European Central Bank having
ended net asset purchases and rapidly raising policy rates by 50 basis points
in July 2022 and 75 basis points in September 2022.”
‘Energy shock’
Prior to the war, economies were rebounding from the COVID pandemic and
central bankers believed the rise in inflation would only be temporary.
But the situation has deteriorated since
Russia sent
troops into neighboring Ukraine on February 24.
The world economy
is now expected to grow by 2.7 percent next year, 0.2 percentage points lower
than in the IMF’s July forecast.
Russia’s outlook,
however, has improved, with the IMF seeing its sanctions-hit economy shrink by
2.3 percent next year, compared to 3.5 percent previously.
Across Europe, Russia’s
gas cuts and soaring utility prices have prompted countries to launch
energy-saving measures — from advising people to lower their thermostats during
winter to Paris turning off lights of monuments earlier — while governments
scramble to find new sources of supplies.
“The energy shock
in Europe is a really big deal,” said Brian Coulton, chief economist at Fitch
ratings agency.
“In many ways, the
energy shock is bigger in the EU than the oil shock was in the US in 1973,” he
said.
The IMF’s report
warns that the situation could worsen.
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