Germany will slide into recession next year and inflation will soar, the government forecast on Wednesday, as Europe’s leading economy grapples with soaring energy prices after Russia’s gas shutdown.

The official predictions were the latest warning that Germany’s economy, which was just bouncing back from the pandemic, will contract in 2023 due to the aftermath of Moscow’s invasion of Ukraine.

Unveiling the government’s latest forecasts of 0.4 percent economic contraction and 7 percent inflation for 2023, Economy Secretary Robert Habeck painted a bleak picture of a “serious energy crisis”.

It “threatens to become an economic and social crisis,” he warned, but insisted that Russian President Vladimir Putin “will fail in this attempt to destabilize the basic economic and political order.”

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

Moscow’s move to halt gas supplies to Europe amid tensions over Ukraine has sparked an energy crisis across the continent, with consumers and businesses facing high prices as winter approaches.

Germany has been particularly hard hit, as before the Ukraine conflict 55 percent of its gas supplies came from Moscow.

Rising energy costs are likely to push inflation to 8 percent in 2022 and 7 percent in 2023, the government predicts.

Nonetheless, according to government forecasts, the German economy will still post growth of 1.4 percent in 2022 after recovering from a post-pandemic recovery earlier in the year.

But it will then contract in 2023, with the economy ministry saying the “key reason” behind the downgrade in forecasts earlier this year was “the halt to Russian gas supplies.”

High energy prices act “as a brake on industrial production – especially in energy-intensive sectors”. According to forecasts, the economy will return to growth in 2024 with growth of 2.3 percent.

The government recently launched a €200 billion ($194 billion) fund to protect consumers and businesses from rising prices, including a cap on energy bills.

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

Forecasts from leading economic institutes late last month showed inflation at 8.4 percent for all of 2022 – and a further rise to 8.8 percent in 2023.

Warnings are mounting that global growth will slow further next year amid a myriad of crises, with the IMF downgrading its 2023 global GDP growth forecast this week.

It predicts that Germany, along with Italy, will be the first advanced economies to shrink after Russia’s invasion of Ukraine.

The signs of an escalating economic crisis in Germany are increasing rapidly.

Last week, official figures showed that industrial production – the pillar of the German economy – was down 0.8 percent in August from the previous month, with energy-intensive industries badly hit.

Inflation hit a 70-year high of 10 percent in September.

The European Central Bank has begun aggressively tightening monetary policy to bring inflation under control, raising interest rates by a historic 75 basis points last month, but some are concerned the move will increase recession risks.

Berlin has scrambled to find alternative energy sources, accelerated construction of infrastructure to import gas from more distant areas and is preparing to keep two nuclear power plants operating longer than originally expected.

Despite the crisis, Habeck tried to find a positive sign for the search for new partners for the energy supply.

“We are making very good progress in loosening the grip on Russian energy imports,” he said.