By Maria Martinez<\/p>\n
BERLIN, April 1 (Reuters) – Germany’s leading economic institutes cut their growth forecasts for this year and next on Wednesday and sharply raised their \u200cforecasts for inflation as the Iran war causes oil and gas prices to \u200csurge.<\/p>\n
The five institutes slashed their joint 2026 economic growth forecast to 0.6% from the 1.3% projected in September \u200band lowered their 2027 growth outlook to 0.9% from a prior estimate of 1.4%, as Reuters had reported on Tuesday.<\/p>\n
They forecast inflation would be 2.8% in 2026 and 2.9% in 2027, up from previous projections of 2.0% and 2.3% respectively.<\/p>\n
FISCAL POLICY CUSHIONS THE SHOCK<\/p>\n
“The energy price shock \u200ctriggered by the Iran war \u2060is hitting the recovery hard, but at the same time expansionary fiscal policy is bolstering the domestic economy and preventing a stronger slide,” \u2060said Timo Wollmershaeuser, head of forecasts at the Ifo institute.<\/p>\n
A spike in oil and gas prices following the start on February 28 of the U.S.-Israeli war on Iran has already helped push \u200bGerman \u200binflation to 2.8% in March.<\/p>\n
Germany’s lower house of \u200bparliament approved initial measures to curb \u200csurging fuel prices last Thursday.<\/p>\n
The economic institutes argued on Wednesday against government intervention to lower energy prices in the short term, saying it would nullify important market signals, advocating instead for targeted social compensation measures.<\/p>\n
Last year, Germany’s parliament approved plans for a massive increase in government spending, throwing off decades of fiscal conservatism in the hope of reviving economic growth \u200cand scaling up military spending.<\/p>\n
But the institutes said \u200bin Wednesday’s report that industry is hampered by a \u200bbarely expanding international business, reflecting declining \u200bcompetitiveness, high geopolitical uncertainty and trade policy burdens.<\/p>\n
Europe’s largest economy has \u200cstruggled to regain momentum since the COVID-19 \u200bpandemic, with rising competition \u200bfrom China and higher energy prices – even before the current spike – challenging its export-driven economic model.<\/p>\n
The economic institutes’ forecasts feed into government economic planning, including tax revenue \u200bprojections.<\/p>\n
The report is a joint \u200ceffort by five prominent economic institutes – RWI in Essen, the Ifo institute in \u200bMunich, IfW in Kiel, IWH in Halle and DIW in Berlin.<\/p>\n
(Reporting by \u200bMaria MartinezEditing by Madeline Chambers and Catherine Evans)<\/p>\n","protected":false},"excerpt":{"rendered":"By Maria Martinez BERLIN, April 1 (Reuters) – Germany’s leading economic institutes cut their growth forecasts for this…\n","protected":false},"author":2,"featured_media":1415,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[1319,1317,446,5,1316,1242,1318],"class_list":{"0":"post-1414","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-germany","8":"tag-economic-growth","9":"tag-economic-institutes","10":"tag-energy-prices","11":"tag-germany","12":"tag-growth-forecasts","13":"tag-inflation","14":"tag-oil-and-gas-prices"},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/posts\/1414","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/comments?post=1414"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/posts\/1414\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/media\/1415"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/media?parent=1414"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/categories?post=1414"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/germany\/wp-json\/wp\/v2\/tags?post=1414"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}