According to the Institute for Economic Research Halle (IWH), the German economy’s recovery hinges on whether the Strait of Hormuz becomes navigable again this summer. If the situation does not improve, the institute states that German economic output in 2026 would at best stagnate. Such a decline would lead to significantly higher oil prices, increased inflation rates, and higher interest rates, alongside a probable setback for German exports.
However, should the Gulf conflict ease and energy prices refuse to rise further, the Institute believes the recovery trend will continue throughout 2026. Under this scenario, production is projected to increase by 0.9% in 2026 and the subsequent year, with similar expansion rates anticipated for Eastern Germany.
This outlook marks a shift from the projections made by IWH economic researchers in March, who had originally forecast 0.7% growth for 2026 and 1% for 2027.
