Belgium, (Brussels Morning Newspaper) German Kiel Institute for the World Economy (IfW) doubled its inflation forecast for 2023 from 4.2% to 8.7%.
IfW also upped its prediction for inflation this year, from 7.4% to 8%, stressing that rising energy prices will affect purchasing power of households and bring down consumer spending, according to Reuters reporting on Thursday.
The institute expects German GDP to drop 0.7% next year, in contrast with June prediction that the German economy would grow 3.3% in 2023.
For 2022, IfW expects GDP to grow 1.4%, down from earlier forecast of 2.1%.
Also on Thursday, the German Ministry for Economic Affairs and Climate Action prepared plans to subsidise electricity consumption for households and small and medium-sized enterprises (SMEs).
According to the Ministry’s plans, the government will introduce quotas for utilities to provide households with electricity at discounted price, and implement similar measures for SMEs.
The Ministry stressed that the measures are aimed at decoupling electricity prices from price of natural gas, which started rising in 2021.
In addition, the Ministry is planning to impose a cap on price of electricity for producers, noting that the difference on market price would go towards relief funding, and is in support of European Commission’s plan to impose an electricity price cap.
“If agreement cannot be reached quickly enough at the European level, a national solution should be sought,” the Ministry concluded.
Germany to lower gas price
Robert Habeck, German Minister for Economic Affairs and Climate Action, announced that the government will bring down price of natural gas.
He blamed Russian President Vladimir Putin for soaring gas prices in the EU and pointed out that the German government cannot provide subsidies to cushion the blow of rising prices forever.
“The most important thing is that we stop the price manipulation by Putin… we cannot subsidise against the high prices in the long run,” Habeck pointed out addressing the lower house of parliament on Thursday and added “that is why we now must and will change the energy market design.”He announced plans to introduce a package of measures to help German companies weather the crisis and provide aid to smaller businesses.
