The German Institute for Economic Research (IFO) stated on Thursday that the German economy will experience a weak recovery in 2026 due to the economic consequences of the war in Iran.
The institute revised its growth forecast for the current year to 0.8%, citing rising energy costs and heightened uncertainty in international trade. Consumer price inflation will likely remain at around 2.1%. Private consumption is now forecast to grow more slowly than originally predicted.
German industry is facing additional headwinds due to weaker demand in key international markets. Despite high energy prices continuing to weigh on energy-intensive industries, labour market conditions will remain relatively stable. The manufacturing sector remains cautious as companies focus on loyalty in global markets.
The duration and intensity of the conflict in Iran will be decisive for Germany’s economic performance in the second half of the year, as disruptions in the supply chain from the Middle East affect domestic prices, experts said.
