German Finance Ministry Issues ‘Gloomy’ Outlook for Country’s Economic Development

Last month, Oya Celasun, Assistant Director in the IMF's European Department, argued that the German economy may face “significant downside risks” in the near future due to gas supply shortages.

The German Finance Ministry noted in its monthly report on Friday that the outlook for the further development of the country’s economy is “currently noticeably gloomy” and marked by “a high degree of uncertainty."

"The significantly lower gas supplies from Russia, the persistently high price increases for energy and, increasingly, other goods, as well as the longer-than-expected supply chain disruptions, also in connection with China's zero-COVID policy, are weighing heavily on the economy's development,” the report pointed out.

The Finance Ministry said that the government plans to present updated economic projections on October 12.

This comes after Assistant Director in the IMF's European Department Oya Celasun warned late last month that negative effects of the overall situation in the world would not stop weighing down the global economy until 2024.

"That is also a big factor for Germany. We are expecting growth to slow down for the world as a whole,” she said, adding that the partial shutoff of the Nord Stream 1 gas pipeline had led to a downturn in confidence.

In early July, the Russian energy giant Gazprom shut down Nord Stream 1 for 10 days, citing the need for maintenance work, which was followed by Gazprom cutting gas supplies via the pipeline by at least 20% of its capacity. Nord Stream 1 delivers Russian natural gas to Germany via the Baltic Sea.

In May, a poll conducted by the international company Global Consult found that at least 53% of Germans had admitted that their financial situation had worsened as compared to last year due to sanctions imposed by the Western countries on Russia.

The survey also indicated that just 13% of respondents expect "continuous good times" for the German economy.

The EU leaders earlier clinched an agreement at a summit in Brussels to put an embargo on Russian oil transported by sea as part of the sixth package of sanctions in response to Moscow’s ongoing special operation to demilitarize and de-Nazify Ukraine. Russian President Vladimir Putin admitted in July that Western sanctions-related risks still remain, but stressed that the restrictive measures inflict more damage on those imposing them than on Moscow.