Because of the consequences of the Iran war, the leading economic research institutes have more than halved their forecasts for the German economy. For this year they only expect an increase in gross domestic product of 0.6 percent, according to the joint diagnosis for the Federal Government emerges. Around six months ago they had still expected an increase of 1.3 percent. According to the report, an increase of 0.9 percent is expected for 2027.
“The energy price shock in the wake of the Iran war is hitting the recovery hard,” said Timo Wollmershäuser, head of economic activity at the Munich ifo Institute. At the same time, however, political measures supported the domestic economy and prevented it from slipping even further.
Researchers against intervention in energy prices
With Look at the energy costs The researchers speak out against government intervention to lower prices in the short term. This would “override important market signals,” they said. Instead, there should be “targeted social compensatory measures”.
The institutes also expect a higher rate
Inflation rate. For the current year, they expect consumer prices to rise by an average of 2.8 percent. In 2027, the inflation rate is expected to rise to 2.9 percent. This in turn dampens private consumption. In March, the inflation rate in Germany was already 2.7 percent at its highest level in two years. It also rose in the euro area because of the Iran war.
Reiche calls for structural reforms
“The message from the spring diagnosis from the research institutes is clear: The conflict in the Middle East is increasing the pressure on German politics“To tackle structural reforms consistently,” said the Federal Minister of Economics Katherina Reiche (CDU). “The growth prospects are significantly weaker than previously expected.” “Courageous reforms” are now needed.
The ifo Institute in Munich in cooperation with the Austrian Institute for Economic Research in Vienna, the German Institute for Economic Research in Berlin, the Leibniz Institute for Economic Research in Halle, the Kiel Institute for the World Economy and the RWI Leibniz Institute for Economic Research in Essen are involved in the spring joint diagnosis. The federal government will use your report as a basis for its own forecast, which, according to the Ministry of Economic Affairs, will be presented on April 22nd.