Germany's principal economic research institutes have pared back their outlook for near-term growth, cutting the 2026 GDP forecast to 0.6% from the 1.3% figure they published in September. The group also reduced its projection for 2027 to 0.9% from 1.4%, citing the economic repercussions of the Iran conflict and the associated rise in energy costs, according to sources familiar with the report.
The institutes say higher energy prices linked to the Iran war are a key factor pushing inflation up. They now expect inflation to reach 2.8% both this year and in the coming year. That represents an upward revision from their prior forecasts of 2.0% for 2026 and 2.3% for 2027.
The revised projections are scheduled for formal presentation in Berlin on Wednesday. Officials use these forecasts as a central input into government economic planning, including calculations for tax revenues. The updated outlook will therefore feed directly into fiscal planning and budget projections in the months ahead.
The report is a collaborative effort by five German economic research institutes: RWI in Essen, the Ifo institute in Munich, IfW in Kiel, IWH in Halle and DIW in Berlin. Sources cautioned that final adjustments to the numbers could still be made before the report is published.
Government policymakers are watching the revised outlook closely as Berlin confronts an array of economic challenges for the coming year. The combination of weaker growth projections and higher inflation carries implications for public finances and planning, given the role these forecasts play in revenue and budget estimates.
While the institutes trimmed growth expectations for both 2026 and 2027, the pronounced revision for 2026 - more than a halving from the previous estimate - underscores how shifts in energy costs can quickly alter macroeconomic profiles. The institutes' decision to lift inflation estimates to a uniform 2.8% in both years signals a reassessment of price pressures tied explicitly to the conflict-related energy shock.
Final figures and any last-minute adjustments will be disclosed at the official presentation in Berlin, at which point the government will incorporate the numbers into its updated outlook and fiscal planning processes.