Sanctions also affect German companies
“For a few weeks now, economic development in the current year has been dominated by the Russian war of aggression in Ukraine.” The sanctions that have been decided will primarily affect the Russian economy. But German companies are also affected if existing trading partners break away or supply chains break.
Since the current economic indicators are published with a time lag of one to two months, the war in Ukraine is not yet reflected in them. As of January, the most recent data had shown further stabilization of the industrial economy, while the development of the service sectors continued to be shaped by the course of the coronavirus pandemic. However, the war “entailed the risk of a renewed aggravation of delivery bottlenecks and an associated slowdown in economic development”.
Inflation is likely to weigh on consumption
In the coming months, the inflation rate driven by energy prices is likely to weigh on private consumption, the ministry said. The inflation rate remains “a cause for concern”. The further development of the price level can hardly be reliably predicted because neither the duration nor the outcome of the war are foreseeable at the moment. Since Germany imports large parts of its gas requirements from Russia, the prices for this energy source are closely linked to the development of the war.
Although futures contracts have recently indicated a certain easing in energy prices over time, this is starting from a highly volatile and very high level. Germany will have to pay significantly more for energy in 2022 than in previous years. Since the price development was already very dynamic due to delivery bottlenecks for important primary products in the run-up to the current highs in energy prices, “significantly higher inflation rates are also to be expected in the coming months”.
By Andreas Kissler
BERLIN (Dow Jones)
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