In EIU’s latest global outlook video, global forecasting director Agathe Demarais, and senior analyst Matthew Oxenford, explore Germany’s outlook amid a reduction in Russian gas supplies, and what this situation means for the euro zone.

Germany’s government has taken steps to prepare for this winter by increasing gas imports from neighbouring countries and reactivating coal power plants. However, the country will struggle to replenish gas storage and the amount of Russian gas that Germany imports in a typical winter is larger than the country’s total storage capacity.

“A move to the third stage of the German government’s emergency security of supply plan, involving gas rationing for industry, seems inevitable. The industrial sector will register a significant contraction, while business confidence has collapsed and shows no sign of recovering. Instead of a mild recession, we now expect a deep downturn in Germany in the final quarter of this year and first quarter of next.”

MATTHEW OXENFORD, SENIOR ANALYST, EIU.

An economic downturn in Germany will have implications for the rest of the euro zone. Spillover effects will be most acutely felt in the chemical and automotive sectors, and growth across the region as a whole will be anaemic this year and beyond.

Find out more about Europe’s political and economic outlook in EIU Viewpoint, our new analysis service. EIU Viewpoint provides unmatched global insights for nearly 200 countries, six industries and 25 critical commodities, helping organisations identify prospective opportunities and potential risks.