A study by the German Economic Institute (IW) published this Thursday (November 8th, 2022) shows that if gas prices doubled next autumn, inflation would rise by 4% in 2023, according to the simulation by the institute’s experts that the The cost of living “for many Germans” would rise.
The Institute recalled in a statement that energy prices rose by 35% and food prices by 15% year-on-year in July. And he warns that because of the government’s citizenship support measures, the impact of inflation has not been felt so much, but that those effects will be temporary.
If gas prices doubled in the third quarter of 2022, unemployment would rise by 0.1%, equivalent to 30,000 people. The IW scenario assumes that another 307,000 Germans will become unemployed by 2023 as a result of the further increase in fuel prices.
The increase in the price of gas would also have an impact on gross domestic product: according to IW expert Thomas Obst, if it were to double this year by 0.2% and by 2% in 2023, this would mean a 1.2% drop in GDP 70,000 million euros.
The report acknowledges that high gas prices are being passed on to consumers for businesses and warns that the consequences of a complete disruption in gas supply for production chains have not been taken into account.
According to Obst, the latter would mean “an additional price shock” for value chains. The German institute expects that this will also increase the risk of recession for the first economic power in the European Union.
Although most economists are in principle expecting a recovery in 2023, Obst admits that this could fizzle out: “What will be decisive is how we accept the cut in gas supplies from Russia.”