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BERLIN – Germany’s economy is expected to recover more slowly than expected as higher energy prices linked to the Iran war weigh on households, companies and exports, the Kiel Institute said in its summer 2026 forecast published Thursday.
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The institute expects real gross domestic product to grow by 0.8% in 2026 and 1.0% in 2027, cutting its 2027 forecast from 1.4% in the spring.
It said the recovery would be supported by expansive fiscal policy, especially public consumption and investment, but held back by higher commodity prices, weak competitiveness and subdued business investment.
Inflation is forecast to accelerate to 2.8% in 2026 from 2.2% in 2025, before easing to 2.3% in 2027.
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The institute said higher oil and gas prices were reducing purchasing power and keeping price pressures elevated.
Private consumption is expected to grow only 0.3% this year and 0.4% next year, while exports are seen rising 1.8% in 2026 and 1.6% in 2027.
The labour market is expected to improve only gradually, with unemployment forecast at 6.3% in 2026 and 6.2% in 2027.
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(Reporting by Maria Martinez, Editing by Friederike Heine)
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