Germany will plunge into recession if Russian gas and oil are cut off, the country’s top bank warned on Monday.
Economic growth in Europe’s biggest economy was already expected to be much slower than previously anticipated due to the conflict in Ukraine, said Christian Sewing, the chief executive of Deutsche Bank and president of the Association of German Banks (BDB).
“The situation would be even worse if imports or supplies of Russian oil and natural gas were to be halted. A significant recession in Germany would then be virtually unavoidable,” he told journalists on Monday.
Germany is heavily dependent on Russia’s energy resources, importing some 55% of its natural gas and nearly 40% of its oil from the country. EU countries have been pushing to stop energy imports from Russia to punish Moscow for its military operation in Ukraine, something to which Germany has been reluctant to agree. A growing number of German industrialists and politicians have been warning of dire economic consequences if Russian energy flows stop.
Sewing also called on the European Central Bank to act to fend off inflation, which reached an all-time high of 7.5% in the euro area in March, according to preliminary figures released by Eurostat last week. Inflation in Germany also soared to its highest level in 30 years, hitting 7.3% in March.
Germany’s economic growth forecast for this year has been slashed from the 4.6% predicted in November to just 1.8%. The German government’s panel of independent economic advisers said the economy won’t return to its pre-pandemic level until the third quarter.
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