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DAX Short

by SignalFactory   ·  April 12, 2022 | 10:30:21 UTC  

DAX Short

by SignalFactory   ·  April 12, 2022 | 10:30:21 UTC  

The German government’s council of economic advisers more than halved its growth forecast for Europe’s largest economy and flagged a “substantial” recession risk as a result of Russia’s invasion of Ukraine.

The advisers, whose forecasts guide the German government in setting fiscal policy, cut their 2022 economic growth forecast to 1.8% from 4.6%, adding output would not reach its pre-pandemic level before the third quarter of the year.

In 2023, Germany’s gross domestic product should grow by 3.6%, the four advisers said.

“We haven’t tried to calculate the exact probability of a recession,” council member Volker Wieland told a news conference.

“For example, we don’t know if there will be a supply freeze or whether the West can no longer avoid imposing an energy embargo. But these are possibilities. So, the risk is substantial,” Wieland said.

He added that, unlike the U.S. economy, Germany still had not fully recovered from the coronavirus pandemic.

The advisers said Germany was on track for further economic recovery before Russia invaded its neighbor on Feb. 24.

“The Russian war of aggression against Ukraine has now drastically worsened economic conditions,” they said in a statement.

The war further frayed supply chains that had already been strained due to the COVID-19 pandemic, and a surge in natural gas and crude oil prices hurt companies and private consumption, they said.

The council forecast inflation to reach 6.1% in 2022 before easing to 3.4% next year.

A potential escalation of the conflict and additional sanctions could have a significantly greater impact on the German and European economies, the experts warned.

“We have to change course and use all levers to become less dependent on Russian raw material supplies,” Wieland told Reuters, adding he favored extending the life of German nuclear power plants.

The country’s three remaining nuclear power plants are scheduled to be shut down by the end of the year, and the government has so far vehemently opposed extending their lifespan as a way of reducing its reliance on Russian gas.

Germany’s heavy reliance on Russian energy could tip its economy into recession, an independent economic think tank warned on Wednesday.

There are rapidly rising concerns over what Russia’s unprovoked invasion of Ukraine will mean for European economies. The war has contributed to higher energy prices, it’s pushing up food prices too and there are additional expenses to deal with a massive influx of Ukrainians fleeing the war.

There is also the ongoing threat that Moscow might choose to cut its supplies of natural gas into the bloc — which could mean the collapse of many businesses.

“The high dependence on Russian energy supplies entails a considerable risk of lower economic output and even a recession with significantly higher inflation rates,” the German Council of Economic Experts, which advises the government in Berlin.

Germany’s Chancellor Olaf Scholz expressed a similar concern last week when addressing the country’s Parliament, saying that imposing an immediate ban on Russian energy imports “would mean plunging our country and the whole of Europe into a recession.”

His comments highlighted the dependence of Germany, and other EU nations, on Russia for energy supplies.

In 2020, for example, Germany imported almost 59% of its natural gas from Russia, according to data from Europe’s statistics office. Other EU nations registered even higher dependencies with the Czech Republic importing 86% of Russian gas, and Latvia and Hungary importing more than 100% — meaning they were buying more than their domestic needs.

DAX Short (Sell)
Enter at: 13546.36
T.P_1: 12426.36
T.P_2: 11478.19
T.P_3: 10225.24
T.P-4: 9387.51
T.P_5: 8245.02
S.L: 15082.31

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