Global Economic Outlook – September 2022 Germany: Europe’s biggest economy threatened by recession Positive first half-year High energy prices and New government overshadowed by gas shortage endangering package to fight negative expectations. economic growth. high inflation. The Russian invasion of Ukraine and its consequences Table 9: KPMG forecasts for Germany continue to significantly affect the economic outlook for 2021 2022 2023 Germany. Real GDP grew by 0.1% in the second quarter of 2022, in comparison to Q1. Compared to Q2 of the GDP 2.6 1. 5 -0.5 previous year, the German economy grew by 1.7%. Real Inflation 3.2 8.0 6.8 GDP has now reached pre-Covid levels. As governmental measures in response to the pandemic were lifted with Unemployment rate 3.6 2.9 3.0 the end of Q1, private consumption, for leisure and Source: Eurostat, KPMG forecasts. travelling, increased by 0.8% compared to the first three Note: Average % change on previous calendar year except for unemployment rate, which is average months of the year. Government consumption on the annual rate. Inflation measure used is the HICP. other hand increased by 2.3% in the second quarter with a focus on social services. In addition to that – and despite trade disruptions due to sanctions against Russian firms – German exports increased by 0.3% in the second quarter of the year. The sentiment in the German business world, however, has cooled significantly. The ifo Business Climate Index fell to 88.5 points in August, reaching its lowest level since June 2020. Companies are expecting business prospects to become much more difficult in the coming months. They were also less satisfied with their current situation. Higher energy prices and the threat of a gas shortage are weighing on the economy. In August, energy prices were 35.6% higher than in August 2021. In the same context, the electricity price for industry exceeded that for households for the first time. Until the beginning of the invasion in Ukraine, Germany obtained a significant share of its gas imports from Russia (55% in 2021). As a result of the country’s efforts to become less dependent on Russian gas, imports fell sharply in 2022. High demand for electricity, massive price jumps on the procurement markets, expensive production and uncertainty regarding gas imports will likely cause the price of energy to rise further in the coming months. © 2022 Copyright owned by one or more of the KPMG International entities. KPMG International entities provide no services to clients. All rights reserved. 31