Germany's economy will contract for three consecutive quarters from now on, following a spike in gas prices after Russia cut supplies to Europe, according to a Reuters poll of economists.
The largest economy and manufacturing power in Europe is one of the most vulnerable in the event of a cut in energy supplies or rising prices, since its industrial sector is heavily dependent on Russian gas.
A Reuters poll conducted August 29-September 1 showed that Germany would experience three consecutive quarters of negative growth, surpassing the definition of a technical recession that only takes two quarters.
As much of the eurozone grapples with an energy crisis, the median of the survey suggests that the German economy will contract by 0.1% and 0.3% in the third and fourth quarters of this year and by 0.2% in the first quarter of next year.
After that, the economy is projected to grow by 0.4% in the second quarter, followed by growth of 0.6% and 0.5% in subsequent quarters of next year. On average, Germany's economy is expected to grow by 1.5% this year and then slow to 0.1% next, median forecasts by 34 economists showed.
The energy crisis has already caused a 400% jump in wholesale gas prices over the past year, hurting energy-intensive industries from metals to fertilizers. As inflation soared to a near 50-year high of 8.8% in August and rising electricity bills are eroding household purchasing power, pressure is mounting on the European Central Bank to hike interest rates more.
Indeed, the latest Reuters poll showed that economists were split between a 50 basis point rate hike and a sharp 75 basis point rate hike at the September 8 ECB meeting. Now, however, expectations are rapidly shifting towards larger increases. Rising electricity bills, devastating droughts and low water levels have exacerbated the eurozone cost-of-living crisis, portending a painful recession over the winter, the news agency said.
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