Germany, Real GDP %YOY (base case - reduced energy supply)

Dependence on Russian energy imports will weigh on Germany’s economic performance despite expedient plans to achieve greater energy independence

The rapid deterioration in economic sentiment confirms our expectations that the pace of expansion will slow significantly, which will require MNCs to quickly adjust their strategic assumptions for both 2022 and 2023. Additionally, scenario planning will remain key to ensuring that firms and their local partners are prepared to potentially soften the impact that an economic contraction would have on their business.


Consumer confidence fell to -15.5 index points in April from -8.1 in March amid a surge in inflation. In March, 80.2% of local companies indicated they were experiencing supply issues, versus 74.6% in February, with business confidence seeing a sharp dip throughout the whole month.

The German government has unveiled a second support package, worth EUR 15 billion, but while the government has opted to not impose sanctions on Russian energy imports, as the violence in Ukraine escalates, such measures are likely to come back on the table.

Our View

Our base case for the German market remains contingent upon ongoing access to Russian energy imports, which nevertheless will see gradually decline, driving up inflation and operating costs and significantly dampening the pace of economic expansion throughout 2022. The possibility of a downside scenario, which will involve the full suspension of gas and oil imports from Russia, remains elevated and would result in a 1.7% YOY contraction for the whole of 2022, followed by a weak recovery in 2023. An upside scenario will involve a quick de-escalation of the ongoing conflict in Ukraine and moderation in energy prices, but the economy will still expand below our initial expectations for 2022 at 2.9% YOY, given that the majority of sanctions on the Russian economy will be retained and that operational costs will stay elevated. While the government has announced a new fiscal support package that will reduce the cost of public transport, cut the tax on fuel, and introduce a one-off EUR 300 energy subsidy, the measures will only slightly soften the rising pressures and will be rendered inadequate in a downside scenario.

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