BERLIN (Reuters), German businesses suffered a slump in March due to concerns about fuel prices rising, drivers shortages, and supply chain stability in the aftermath of war in Ukraine. This suggests a potential future recession.

According to the Ifo Institute, its index of business climate dropped from 98.5 in February, which was downwardly revised by 98.5 in February. An analyst poll by Reuters had predicted a reading of 94.2 in March.

Thomas Gitzel of VP Bank Group, chief economist said that the message coming from Germany’s top economic barometer was clear. “The German economy will likely slide into recession.”

Gitzel expressed some optimism that Germany’s economy could absorb the effects of the war by publishing the index of purchasing managers on Thursday. However, the Ifo index published Friday “reveals the contrary,” Gitzel added.

“The stark divergence of the actual situation from expectations is not unusual. Jens-Oliver Niklasch is a senior economist at Landesbank Baden-Wuerttemberg.

The uncertainty is not limited to the Ukraine war. It raises doubts about Germany’s ability to sustain its business model. Andreas Scheuerle from Decabank pointed out the unbalanced dependence of Europe’s biggest economy on both suppliers and customers countries.

Commerzbank (DE)’s Joerg Krümer says companies fear Western oil boycotts, which could lead to a significant undersupply on the Russian market and drive prices up.

Also, the index of business expectations fell from 98.4 to 85.1. This is the largest drop since the start of the coronavirus epidemic.

According to Klaus Wohlrabe, an economist at Ifo, nearly two thirds of industrial businesses want to increase their prices faster than ever. Retailers are looking for the same, he said to Reuters.

He stated, “This creates a domino effect.”

Although the COVID-19 curbs have eased, service workers can be happy initially. But, trouble lies ahead as the cost of filling up a car is increasing and the family will need to limit their time for leisure, Gitzel explained.

Gitzel also stated that Thursday’s German government relief package was not sufficient to cover the increase in costs.