News
Energy Prices · GDP Growth · German Economy · Inflation
Germany's leading economic-research institutes have significantly reduced their 2026 and 2027 GDP growth expectations to 0.6% and 0.9% respectively, down from previous forecasts of 1.3% and 1.4%, attributing the revision to the Middle East conflict's impact on energy markets.
The joint forecast by five institutes, including the Ifo Institute and the Kiel Institute for the World Economy, also projects a rise in inflation, estimating 2.8% for 2026 and 2.9% for 2027, up from prior estimates of 2.0% and 2.3%. These revised projections assume the Strait of Hormuz shipping route reopens in the second quarter of 2026 and oil and gas exports normalize from the second half of 2026.
Despite the energy price shock from the Iran war, as noted by Timo Wollmershaeuser, head of forecasts at the Ifo Institute, Germany's planned fiscal stimulus, involving over $1 trillion in defense and infrastructure investments, is expected to bolster the domestic economy and prevent a more severe downturn. Last month's inflation registered at 2.7%.
German Institutes Halve Growth on Middle East Conflict(current)
