FRANKFURT, Germany (UKTN) — The German government said Wednesday it expects economic growth to strengthen rather than decline this year as Europe’s largest economy manages its energy separation from Russia and provides support to consumers and businesses hit by higher energy costs.
The outlook improved to 0.2% growth from a 0.4% contraction expected in October as Germany feared it could run out of natural gas used to power factories, electricity this winter generate and heat homes. Warmer-than-normal weather helped, as did a battle to build additional supplies of liquefied natural gas, or LNG, which comes by ship rather than by pipeline from Russia.
Russian state-owned exporter Gazprom has halted supplies of natural gas to Europe just a trickle after countries support Ukraine during the war. Germany, one of the countries most dependent on Russian natural gas to power its industry, had no LNG receiving terminals at the start of the year. It now has three floating terminals on the north coast, at a cost of billions of euros.
“Today, early 2023, we can say: we have made the crisis manageable,” Vice Chancellor and Minister of Economic Affairs Robert Habeck said in a statement accompanying the report. “The high prices were and are a burden for private households, but we have been able to absorb the price pressure.”
Germany has introduced price caps for electricity and natural gas as part of an additional €200 billion in government spending, allowing people to buy 80% of their heat or electricity at fixed prices.
As the outlook for Europe’s largest economy looks less bleak, more economists say the 20 countries using the euro can avoid a superficial technical recession, defined as two consecutive quarters of falling output.
But high inflation is a significant drag on growth, as higher food and utility prices erode consumer purchasing power.
