Leading economic institutes in Germany have significantly lowered their forecasts for 2026 and 2027, while raising their inflation expectations, in a context marked by the war in Iran and soaring energy prices.
According to these joint projections, German economic growth is expected to reach only 0,6% in 2026, compared to the previously estimated 1,3%. For 2027, it is now projected at 0,9%, down from the earlier forecast of 1,4%.
At the same time, inflation forecasts have been significantly revised upwards. Institutes now anticipate inflation of 2,8% in 2026 and 2,9% in 2027, compared to 2,0% and 2,3% respectively in their previous estimates.
This deterioration is mainly due to the increase in oil and gas prices, a direct consequence of the conflict in the Middle East. The rise in energy costs is weighing on economic activity and reducing purchasing power.
Economists estimate that this energy shock could cost the German economy around 50 billion euros over two years, due to increased spending related to energy imports.
"This shock impoverishes Germany," stressed Oliver Holtemoeller, representative of the Institute for Economic Research in Halle.
Despite this difficult context, the institutes believe that a more expansionary fiscal policy could help mitigate the economic impact of the crisis.
However, they are reserved about direct short-term intervention in energy prices, believing that this type of measure could be ineffective or counterproductive.
These new forecasts illustrate the vulnerabilities of Europe’s largest economy in the face of external shocks, particularly in a context of energy dependence.
As the crisis drags on, Germany's economic outlook remains uncertain, between slowing growth and persistent inflationary pressure.
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