The German economy risks a 4.8% hit if Russia cuts off natural gas supplies to the country, the International Monetary Fund has warned, according to Bloomberg.
Most of the impact will materialize next year, due to output cuts and damage to economic confidence, IMF analysts said. Inflation could rise by about 2 percentage points on average in 2022 and 2023, they noted.
“Cutting out Russian natural gas would have significant effects on German economic activity,” said researchers Ting Lan, Galen Sher and Jing Zhou.
Russian President Vladimir Putin has signaled that Europe will start receiving natural gas again through Nord Stream 1, but warned that unless the dispute over the sanctioned components is resolved, flows will be severely curtailed.
While German officials have taken significant steps to mitigate the damage, more can be done to promote greater energy efficiency, the IMF said. Lower consumption by households, for example by reducing heating temperatures during the winter season, would also significantly help limit the impact, the IMF said.
Source: Capital
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