According to the latest estimates of the Institute for Economic Research (Ifo), quoted by Bloomberg, in 2026 the growth rate of the German economy will be only 0.6 percent, which means a decrease of more than half compared to September estimates indicating a result of 1.3%.
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Experts indicate that the key factor inhibiting the development of the economy is the increase in inflation, which limits private consumption. Forecasts assume that consumer prices will increase by 2.8% this year and by 2.9% next year.
Timo Wollmershaeuser, head of the forecast department at the Ifo Institute, estimates that “the energy price shock caused by the war with Iran is hitting the economic recovery hard“At the same time, as he notes, The government's expansionary fiscal policy partially alleviates the effects of the crisis, preventing a deeper slowdown.
The Merz government is looking for solutions
Chancellor Friedrich Merz, whose cabinet counted on investments in infrastructure and defense as a way to stimulate the economy, is preparing a support package for consumers affected by rising energy costs.
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The solutions being considered include the proposal of Finance Minister Lars Klingbeil to introduce a tax on extraordinary profits of energy companies. These measures aim to limit the effects of the crisis without excessively burdening the state budget.
