Germany’s inflation rate could reach 10% this fall, the highest in seven decades, according to the country’s central bank chief Joachim Nagel, who spoke to the Rheinische Post last week.
Natural gas prices rose as a result of the development, as Gazprom had already reduced the pipeline’s gas flows to 20% of their capacity, citing technical issues. Germany, which is heavily reliant on Russian gas, has accused Russia of weaponizing gas in retaliation for sanctions related to the Ukraine war, and is bracing for a severe energy shortage this winter.
According to an official transcript from the German central bank, “the issue of inflation will not go away in 2023,” Nagel told Rheinische Post. “Bottlenecks in supply and geopolitical tensions are likely to persist.”
According to the country’s statistics office, Germany’s economy stagnated in the second quarter of 2023, growing 0% over the first quarter. Meanwhile, according to the statistics office, inflation reached a 40-year high of 7.5% in July compared to the previous year, owing primarily to high energy prices.
The German central bank forecasted 4.5% inflation in 2023 in June, but Nagel told Rheinische Post that price increases are likely to average more than 6%.
Germany’s energy crisis is exacerbated by a summer heatwave that has caused the Rhine to dry up, disrupting a vital energy shipping route.
“If additional delivery problems, such as prolonged low water levels, are added, the economic prospects for the second half of the year will deteriorate further,” Nagel told the German news outlet. “As the energy crisis worsens, a recession appears to be on the horizon for next winter.”
German industry leaders have warned of severe economic consequences if Russian gas is completely cut off. Europe’s largest economy has already begun turning off some heating and lighting to save energy.
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