According to the Institute for Macroeconomics and Business Cycle Research (IMK) of the Hans-Böckler Foundation, the war in Iran and the resulting energy price shock have significantly hampered the growth of the German economy.
The IMK announced on Thursday that they now project the Gross Domestic Product (GDP) will rise by 0.6 percent in 2026 and 0.9 percent in 2027. This forecast assumes that the conflict does not escalate further and that energy supplies through the Strait of Hormuz normalize. Notably, the IMK has revised its GDP growth expectation for this year downwards by 0.3 percentage points compared to its previous projection from March 2026.
Regarding other economic indicators, inflation is expected to average 2.8 percent in 2026, higher than anticipated, which will put pressure on private consumption. Inflation is projected to decrease to 2.3 percent in 2027. Unemployment is expected to rise to 6.4 percent in 2026 before falling back to 6.3 percent in 2027. Sebastian Dullien, Scientific Director at the IMK, stated that while the economic damage caused by the Iran war is considerable, it remains manageable.
Globally, the world economy is predicted to grow by 3.0 percent in 2026, a figure considered historically weak. The economic development has been burdened by the Iran war and US trade policies, meaning that German exports will only receive weak momentum from key trading partners. Exports are forecast to increase slightly by 0.3 percent in 2026 and by 1.5 percent in 2027.
