(Bloomberg) -- Germany’s economy will suffer the only the contraction in the Group of Seven this year as it struggles with fallout from the war in Ukraine, according to the International Monetary Fund.

Gross domestic product will fall 0.3%, forecasts released on Tuesday by the Washington-based institution show. Officials cut their outlook, cited the lingering impact of the energy crisis that sparked a recession last year which lasted through the first quarter.

While the prediction chimes with that of Germany’s Bundesbank, its contrast with continued expansions in other counterparts underlines the challenge faced by Chancellor Olaf Scholz as he struggles to revamp the growth model of Europe’s biggest economy. 

The source of the weakness is manufacturing, which has borne the brunt of the energy squeeze, lower demand from China, and tighter monetary policy. 

Reports this week from a survey of purchasing managers to the Ifo institute’s index of business sentiment suggest the slump may not be over, raising the prospect that the IMF’s next forecast round could feature an even weaker outlook. 

“It looks like the German economy is really having a hard time getting out of this recession,” Ifo President Clemens Fuest told Bloomberg Television’s Manus Cranny on Tuesday.

German data next week will reveal whether the economy shook off its slump in the second quarter or continued to contract.

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