BERLIN (Reuters), – While the German economy appears to be on track for a slow recovery, there are risks. Berlin needs to focus its efforts on reducing the effects of war in Ukraine as well as securing natural gas supplies.

After a visit to Germany, the IMF stated that fiscal policy should be flexible and adaptable in uncertain environments.

The IMF projected that the German economy’s growth would be a slowing of 2% between 2022 and 2023, but will pick up in 2023 to slightly more than 2% if energy prices, supply shortages, and COVID-19 infected remain under control.

In its Article IV report, the IMF stated that “Growth would then decrease toward potential after 2024”.

It stated that output would not rise to pre-pandemic levels in the medium-term due to headwinds such as higher energy prices for private investment, lower external demand and increased economic and geopolitical uncertainties following war.

According to the IMF, Berlin’s first priorities should be to protect gas supplies and cushion spillovers from Russia’s invasion of Ukraine.

It stated that the uncertain future of fossil fuel supply makes it even more urgent for government to accelerate a green transition.

According to it, the biggest threat to the outlook lies in a complete and persistent shutting down of Russia’s gas exports to Germany.

According to the IMF, if there are downside risks, the government must “continue providing flexible support and may consider activating debt break clause for an additional year.”

Germany’s “debt brake”, which requires that federal and state budgets be in balance without borrowing revenues, was temporarily suspended because of measures related to COVID-19.

Christian Lindner, Finance Minister, is seeking to reaffirm the debt-free zone in 2023.