Skyrocketing gasoline prices are slashing energy costs in Germany, pushing the EU’s largest economy into recession, leading economic institutes reported on Thursday. They see the country’s gross domestic product (GDP) contracting 0.4% next year.

The four institutes (Munich-based Ifo, the Kiel Institute for the World Economy (IfW Kiel), the Halle Institute for Economic Research (IWH), and the Leibniz Institute for Economic Research (RWI)) had previously projected that GDP would increase by 3.1%. in 2023.

According to their joint economic forecast, economic output will grow 1.4% this year, down from the 2.7% forecast in the spring.

“The crisis in the gas markets is having a strong impact on the German economy”, the report said, adding that “High gas prices are dramatically increasing energy costs, leading to a massive reduction in purchasing power.”

Under a very cold winter risk scenario, gas shortages and lack of savings in energy consumption, the institutes expect GDP to contract by 7.9% in 2023 and 4.2% in 2024.

Economists have been warning lately that Germany will be among the countries hardest hit by the global economic slowdown next year. According to statistics office Destatis, annual inflation in Germany accelerated to 8.8% in August, the highest level in almost 50 years. The country’s central bank, the Bundesbank, warned last month that a recession was looming in Germany. “increasingly likely” but did not provide any number.

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