40% of German companies fear economy will shrink in 2023: survey

Four out of ten German companies expect business to shrink in 2023, a survey by the German Economic Institute (IW) has shown, blaming high energy costs, supply chain issues and the continuing conflict in Ukraine.

"The risk of a gas shortage in the 2022/23 winter season is no longer as present as it was in the summer of 2022, and energy prices have also retreated since then. However, they remain at a high level and production disruptions cannot be ruled out," the IW said on Monday in the survey seen by the Reuters news agency.

"Moreover, it will only become clear in the course of 2023 how extensive gas and energy supply can be built up for the next winter and the extent of any possible disruptions that could occur in 2023," added the survey report by the German Economic Institute. 

The survey of around 2,500 companies showed that about a third of companies expect output to stagnate, and the remaining quarter predicts business will grow.

Germany's economy, Europe's largest, is forecast to shrink by 0.3 percent next year, the most among G7 nations, according to the International Monetary Fund, hit by a sudden halt of gas flows from Russia, its former main supplier, since the start of the Ukraine war.

The outlook is particularly bleak in the German construction sector, where more than half of the companies surveyed by IW expect a decline in production and just 15 percent anticipate more business.

The picture is barely brighter in industry, where 39 percent of surveyed companies forecast a decline, driven by a cautious assessment in the consumer and basic industries.

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