RTWed, 10 Aug 2022 06:02 UTC
© Reuters/Michaela RehleBusiness in Munich, Germany remains stagnant
The German economy is expected to lose more than €260 billion ($265 billion) in added value by 2030 due to the conflict in Ukraine and high energy prices, Reuters reported on Tuesday, citing a study by the Institute for Employment Research (IAB).
According to the study, Germany's gross domestic product (GDP) is set to be
1.7% lower in 2023, while the country will have about
240,000 fewer jobs.
Employment is forecast to stay at this level until 2026, when the after-effects of the current crises are expected to end.
The country's
hospitality industry, already weakened by the Covid-19 pandemic, is
expected to be hit the hardest as consumers' purchasing power dwindles. Other sectors which are likely to be affected are the
chemical industry and metal production, as they are highly reliant on energy supplies.
The study notes that
energy prices are already up by 160% against those recorded prior to Russia's military operation in Ukraine and the subsequent sanctions war between the EU and Russia. If these prices are to grow further, which they will if Berlin stops purchasing Russian energy,
Germany's 2023 economic output is expected to be nearly 4% lower than it would have been without the current pressures, according to the study.
Earlier this year, five of Germany's top economic research centers published a joint forecast regarding the effect of the current situation on the country's GDP. They estimated that
Germany could lose slightly less, €220 billion in GDP, but over a shorter period of time - in two years. They also predicted that the country would experience the
highest rate of inflation in its modern history, and possibly a recession, if Berlin doesn't change its stance on Russian energy supplies.
Comment: Industry without power - a downhill scenario for the UK:
Cold weather combined with gas shortages is expected to force UK authorities to enact a "reasonable worst-case scenario," providing for four days of blackouts during the upcoming winter, Bloomberg reports.
The probable outages may affect not only industry, but also the country's households, as a result of an electricity capacity shortfall amounting to about a sixth of peak demand - even after emergency coal plants have been fired up.
At the same time, Britons are expected to see average annual energy bills rise above £4,200 ($5,086) in January from the current fee of just under £2,000, adding to the soaring consumer price inflation.
Meanwhile, the government's base case scenario doesn't include blackouts. The first stage of the UK's emergency plan reportedly involves the network operator directing flows of gas on the system, temporarily overriding commercial agreements, while the second stage includes halting supplies to gas-fired power stations, triggering planned power cuts for industrial and domestic users.
The UK energy industry regulator Ofgem has said it would adjust its cap quarterly rather than half-yearly due to current volatility in energy markets, meaning bills are likely to rise again in January.
Britain, which has reportedly been shipping record amounts of gas to continental Europe, has very little domestic storage capacity. The UK Department for Business, Energy and Industrial Strategy (BEIS) said Britain isn't dependent on Russian energy imports, as it has its own North Sea gas reserves and "steady imports from reliable partners." It also pointed out that the UK has the second largest LNG port infrastructure in Europe and "a gas supply underpinned by robust legal contracts."
Comment: Industry without power - a downhill scenario for the UK: