FRANKFURT, Oct 12, 2022 (BSS/AFP) - Germany's output will contract 0.4 
percent next year and inflation is expected to hit seven percent, the 
government forecast Wednesday, as Europe's top economy battles soaring energy 
prices following Russia's gas shutdown.

"We are currently experiencing a serious energy crisis, which threatens to 
become an economic and social crisis," warned Economy Minister Robert Habeck, 
as he unveiled the official autumn economic forecasts.

Germany, along with the rest of Europe, is facing skyrocketing prices -- 
particularly of energy -- after Moscow shut off crucial fossil fuel supplies 
as tensions soar over its war in Ukraine. 

Its economy is still set to register growth of 1.4 percent in 2022, according 
to the government forecasts, after having enjoyed a post-pandemic rebound 
earlier in the year.

But it will shrink 0.4 percent in 2023, with the economy ministry saying the 
"central reason" for the downgrade from forecasts earlier this year was "the 
halt to Russian gas supplies".

High energy prices are acting as "a brake on industrial production -- above 
all in energy-intensive sectors". The economy will return to growth with 
expansion of 2.3 percent in 2024, according to the forecasts.
 
Inflation meanwhile will be eight percent in 2022 and seven percent in 2023, 
the government forecast.

The government recently unveiled a 200-billion-euro fund to shield consumers 
and businesses from surging prices, which includes a cap on energy costs.

Without the cap, consumer prices would be much higher in 2023, the forecasts 
said.

Germany has been particularly hard hit by Moscow's shutdown of gas, having 
sourced a massive chunk of its supplies from Russia prior to the Ukraine war.

But Habeck said he was "convinced" that Russian President Vladimir Putin will 
"fail in this attempt to destabilise the basic economic and political order". 

Putin "will also fail on the battlefield in Ukraine", he added.