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Holiday plans not affected by recession

The German economy may be going down the tubes, but the recession isn’t stopping Germans from taking their summer vacation, according to a new poll.

Holiday plans not affected by recession
Photo: DPA

The number of Germans who said they’d be going on vacation this summer dropped just one percentage point, to 56 percent compared to last year, the European-wide poll from the IPSOS research institute said.

After surviving the cold winter and damp spring, almost half of the Germans surveyed said climate was the most important factor in deciding on a destination.

But the sinking economy is still having an impact on German travelers. The average holiday budget sank four percent to €2,150 per household. And the number who said price was the important concern in planning a vacation rose two percentage points to 44 percent.

Compared to the European neighbours, Germans are solidly in the middle of the pack. Three-quarters of Italians say they plan to take a vacation this summer. Austrians spend about €200 more on vacations than Germans, while the recession-mired Spaniards will only spend €1,659 this year.

In recent years, a strong pound coupled with a growing number of budget airlines has spread British tourists far and wide across the continent. But some Europeans may breathe a sigh of relief to know that the weakening sterling and a slow economy might mean fewer marauding British stag parties this summer. Travel budgets of UK travelers have fallen more than 10 percent to €2,230.

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ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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