Energy prices in particular are paralyzing
German economy loses 200 billion euros due to war in Ukraine
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Germany has long been particularly dependent on Russian energy imports. Sanctions are cutting off deliveries, prices are exploding and the economy in this country is suffering. According to studies, the cost to the German economy is 200 billion euros. But it's not just companies that are suffering.
The Russian attack on Ukraine almost two years ago had a significant impact on the German economy. “The economic costs for Germany after two years of war in Ukraine are likely to be significantly higher than 200 billion euros,” said the President of the German Institute for Economic Research (DIW), Marcel Fratzscher, to the “Rheinische Post”. The main reason is the increased energy prices.
“Above all, the high energy costs have reduced growth in Germany by 2.5 percentage points or 100 billion euros in 2022 and by a similar amount in 2023 to date,” the DIW boss told the newspaper. However, these are only the “direct financial costs”. Further costs would arise from the “escalating geopolitical and geoeconomic conflicts, especially with China,” due to the war. These would hit export companies particularly hard, explained Fratzscher.
The “Rheinische Post” also quoted from an as yet unpublished study by the employer-related Institute of German Economics (IW), according to which the Ukraine war has so far cost Germany around 240 billion euros. “While the defaults in 2022 are around 100 billion euros, they rose again to a good 140 billion in 2023,” the study says. However, the consequences of the corona pandemic will continue to have an impact in 2022 and 2023, so that an exact definition of the effects of the Ukraine war cannot be calculated, explained IW researcher Michael Grömling.
4,800 euros in consumption loss per capita
For the calculations, according to the “Rheinischer Post”, he compared the actual development with a counterfactual scenario without a war in Ukraine. If you add up the effects of the pandemic and geopolitical developments since the beginning of 2020, the result is a total loss of growth of four percent of economic output. This was accompanied by consumption losses “of a good 400 billion euros based on the years 2020 to 2023,” according to the study. “This corresponds to a total loss in consumption per inhabitant of around 4,800 euros.”
According to DIW boss Fratzscher, the costs of the Ukraine war hit people with low incomes particularly hard because they experienced “two to three times higher inflation than people with high incomes.” “The German state primarily supports energy-intensive companies with massive subsidies, but people with low incomes have to tighten their belts significantly,” he told the “Rheinische Post”.
The economic development in Germany is currently giving widespread cause for concern. Federal Economics Minister Robert Habeck himself described the situation as “dramatically bad” last week. He announced that the government is lowering its growth forecast for this year from 1.3 percent to just 0.2 percent.
