Deutsche Bank economists say Germany’s recovery is being pushed back by higher energy costs and uncertainty linked to the Middle East conflict. They cut their 2026 growth forecast to 1.0% while keeping 2027 at 1.5%. Inflation is projected to average 2.7% this year. Recent data show weak industrial production but stronger exports and stable core inflation.

Energy shock weighs on German outlook

"The energy price shock stemming from the conflict in the Middle East and the increased perception of uncertainty are likely to significantly delay the economic recovery."

"Against this backdrop, we have lowered our growth forecast for 2026 from 1.5% to 1.0%."

"The annual aggregate rate rose to 2.7% as a result of the energy price shock."

"New orders in the manufacturing sector stabilized in February with a lower-than-expected increase of 0.9% compared to the previous month, following a significant decline in January due to fewer large orders."

"A preliminary agreement on an income tax reform package could be reached before the key figures for the 2027 budget are presented on April 29."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)