The German government has halved its economic growth forecast for 2026, amid the impact of the Iran war on energy prices and global trade tensions.
The Ministry of Economy in Berlin now estimates a GDP growth of only 0.5% in 2026, down from the previous 1%, and has lowered the forecast for 2027 to 0.9% from 1.3%, according to Reuters.
Economic Growth Halved
The downward revision of forecasts highlights the fragility of the economic recovery of the largest European economy, in an increasingly complex international context.
The Minister of Economy, Katherina Reiche, explained that the expected recovery is once again slowed down by external factors. The official pointed out that the rising energy and raw material prices, fueled by the conflict in Iran, are putting pressure on both households and businesses.
Exports Can No Longer Sustain the Economy
Germany's economic model, heavily reliant on exports, is affected by changes in global trade. Protectionist tendencies and market fragmentation reduce growth opportunities.
According to the new estimates, Germany's exports will only start to grow in 2027, at an annual rate of 1.3%. At the same time, imports are expected to advance more rapidly, by 1.8%, leading to a reduction in the trade surplus.
Expensive Energy, Pressure on the Economy
High energy costs remain one of the main vulnerabilities of the German economy. After the shock caused by the war in Ukraine, the conflict in Iran is amplifying pressures through the increase in oil and gas prices.
The blockades in the Strait of Hormuz, a crucial route for global fuel supply, have contributed to accelerated price hikes, directly impacting inflation and production costs.
Inflation Accelerates Once Again
The Ministry of Economy anticipates an inflation increase to 2.7% this year and 2.8% in 2027, up from 2.2% last year.
The rise in energy costs is transmitted throughout the economy, affecting consumer prices and reducing purchasing power, at a time when Germany is still trying to consolidate its recovery after the pandemic and cope with increasingly strong competition from China.
