The Ukraine war has dashed hopes of a strong upswing. The first quarter was still reasonably robust. However, the environment for Germany has deteriorated significantly.

The German economy started a difficult year with mini-growth. Despite the ongoing corona pandemic and the first consequences of the Russian attack on Ukraine, economic output increased by 0.2 percent in the first quarter of 2022 compared to the previous quarter.

On Wednesday, the Federal Statistical Office confirmed its first estimate of the development of gross domestic product (GDP) in the first quarter from the end of April.

However, the prospects for the economy in Germany and the euro zone have clouded over considerably: rising energy prices and supply bottlenecks are increasingly becoming a burden for industry, and the highest inflation in decades is slowing down private consumption.

Economists are still assuming that the German economy will grow in the current year. But the economic forecasts are now much more pessimistic than before the Russian invasion of Ukraine.

Expectations revised downwards

The EU Commission recently corrected its growth expectations for both the European economy and Germany, Europe’s largest economy, sharply downwards: For the European Union and the euro countries, Brussels expects growth of only 2.7 percent instead of 4 percent in the current year. The GDP forecast for Germany was lowered from 3.6 percent to 1.6 percent.

According to the Wiesbaden statisticians, higher investments ensured growth in Germany in the first three months of the current year, while the export balance slowed down the export nation. The feared second negative quarter in a row and with it a so-called technical recession at least did not materialize. In the final quarter of 2021, economic output in Germany fell by 0.3 percent. If the economy shrinks two quarters in a row compared to the previous quarter, economists speak of a “technical recession”.

However, the Ukraine war has dashed hopes of a strong economic recovery in the current year. The economic consequences of the Russian attack on the neighboring country have exacerbated the problems that were already troubling the German economy: above all, skyrocketing energy prices and supply bottlenecks for raw materials and intermediate products.