FRANKFURT (Dow Jones) — The President of the German Institute for Economic Research (DIW), Marcel Fratzscher, expects a deep and long-lasting downturn that many companies will not survive. “The recession will be unavoidable, we are already in a downturn,” said Fratzscher in an interview with the editorial network Germany. According to the economist, the medium and long-term prospects are also bleak. “My concern is not so much that we will shrink in the next two quarters, but that there will be no recovery after that either,” Fratzscher continued.
“We expect the economy to shrink for 2023 as a whole, and 2024 will not be such a good year either,” warned the DIW boss. “We will have to prepare for a few years of stagflation.” The current situation is not comparable to the Corona crisis. There is a high probability that there will not be a double-digit slump in the economy like in the second quarter of 2020. “But we will see less activity across the board,” said Fratzscher. The special thing about this crisis is the decline in private consumption, because many people have to tighten their belts. “This is a widespread problem and ultimately affects the entire economy.”
An increase in insolvencies cannot be avoided in this situation, said Fratzscher. “The bitter truth is that we will see a huge structural change in the German economy. Many energy-intensive companies will not survive,” he added. The costs for gas and other fossil fuels are not only temporarily increased. “This will continue until we have made the switch to renewable energy sufficiently,” he predicted. Many companies will go bankrupt and the state could not bail them all out.
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(END) Dow Jones Newswires
September 10, 2022 08:07 ET (12:07 GMT)