Germany's GDP growth forecast halved due to Ukraine crisis

A laborer works at a construction site in Berlin, capital of Germany, on July 30, 2021. (Photo by Stefan Zeitz/Xinhua)

However, economic recovery is not breaking off and IfW Kiel expects GDP growth to reach 3.5 percent in 2023.

BERLIN, March 17 (Xinhua) -- The Kiel Institute for the World Economy (IfW Kiel) on Thursday almost halved its forecast for Germany's gross domestic product (GDP) growth in 2022 from four percent to 2.1 percent.

The annual inflation rate in Germany is expected to rise to 5.8 percent in 2022, the highest since the country's reunification more than 30 years ago, according to the institute's "Spring Forecast."

The Ukraine crisis "delays the return to pre-COVID-19 levels into the second half of the year" and is "putting a noticeable strain on the German economy and increases the already strong inflationary pressure," IfW Kiel said.

The economic turmoil caused by the Ukraine crisis is likely to cost Germany around 90 billion euros (99.5 billion U.S. dollars) in economic output this year and next, according to the institute.

Pedestrians are seen in front of the Alte Oper in Frankfurt, Germany, Jan. 15, 2022. (Xinhua/Lu Yang)

"The economy in Germany and worldwide is subject to opposing forces," said Stefan Kooths, head of economic forecast and vice president of IfW Kiel.

"The strong upward and catch-up effects following the removal of most COVID-19 infection control measures" are offset by the shock waves resulting from the Ukraine crisis, he said.

Production capacity in Germany is projected to remain underutilized until the end of the year and economic output will therefore "remain below potential."

However, economic recovery is not breaking off and IfW Kiel expects GDP growth to reach 3.5 percent in 2023.

A construction site is seen in Berlin, capital of Germany, on July 30, 2021. (Photo by Stefan Zeitz/Xinhua)

In 2022, GDP is expected by the institute to increase by 2.8 percent in the eurozone, by 3.1 percent in the United States.