According to the leading research institutes, Germany cannot escape a recession.

Due to the energy crisis in the winter half-year, the economy is slipping into an economic trough and will then shrink, the government advisers declared in their autumn report on Thursday "Energy crisis: inflation, recession, loss of prosperity", thereby confirming a Reuters report from Tuesday.

For this year, the experts only expect economic growth of around 1.4 percent and for 2023 a decline in German gross domestic product (GDP) of around 0.4 percent.

In 2024, the economy is likely to grow again by 1.9 percent.

In their risk scenario – i.e. with a shortage of gas, a cold winter and a lack of savings in energy consumption – the researchers even estimate an economic downturn of 7.9 percent for 2023.

That would be significantly more than in the financial crisis and in the first Corona year 2020. Under these circumstances, GDP should also shrink by 4.2 percent in 2024.

"The high energy and food prices, which are likely to continue to rise in the coming year, will cause a significant loss of purchasing power," said Torsten Schmidt, head of economic activity at the RWI Institute in Essen.

"Both low-income households and companies are therefore dependent on further political support." However, companies should not be permanently subsidised.

Inflation will then climb from 8.4 percent on average in 2022 to 8.8 percent next year and will only calm down again to 2.2 percent in 2024.

Spring forecasts capped

In spring, the experts had still expected growth of 2.7 percent for 2022 and 3.1 percent for 2023.

However, because of the consequences of the Ukraine war and the effects on energy, raw material and consumer prices, the institutes have now significantly reduced their estimates.

Economic output in 2022 and 2023 will be a total of 160 billion euros lower than expected in spring.

The so-called joint diagnosis comes from the Essen RWI, Munich Ifo, Kiel IfW and the IWH from Halle.

The Berlin DIW is currently pausing and wants to work on the report again in 2023.

The paper serves as the basis for the government's economic forecast, which in turn is the basis for the preparation of public sector budgets.