Germany Cuts Growth Forecasts on Middle East Energy Surge

Germany's government has sharply reduced its economic growth forecasts for the coming years, attributing the downgrade to surging energy prices triggered by the escalating conflict in the Middle East. On Wednesday, Economy Minister Katherina Reiche announced that gross domestic product is now expected to expand by just 0.5 percent in 2026, half the 1 percent projected in January, and by 0.9 percent in 2027, down from 1.3 percent. The revisions reflect the heavy toll of higher oil and gas costs on Europe's largest economy, which had shown early signs of recovery before the latest geopolitical shock.

The conflict, involving hostilities in Iran and broader regional tensions, has driven up global energy prices since February, exacerbating inflation and straining manufacturers in energy-intensive sectors like steel and chemicals. Reiche stated during a press conference in Frankfurt that the escalation "has set us back economically" and hit the structurally weakened economy hard. Inflation is now forecasted to reach 2.7 percent in 2026 and 2.8 percent in 2027, up from 2.2 percent in 2025, with March figures already at 2.7 percent, the highest in over two years. Households are facing...