Finance
Germany's IfW institute lowers economic growth forecast on high commodity prices
Published by Global Banking & Finance Review®
Posted on March 12, 2026
2 min readLast updated: March 12, 2026
Quick Summary
The Kiel-based IfW trimmed its 2026 GDP forecast to 0.8% from 1.0%, citing rising commodity prices driven by the Iran war that will shave 0.6% off annual GDP. Inflation is now expected at 2.5% in 2026, up from 1.8%, before easing to 2.1% in 2027.
Germany's IfW Cuts 2026 Growth Outlook Amid Soaring Commodity Prices
IfW Institute Revises Economic Forecasts Due to Geopolitical Tensions
Impact of Iran Conflict on Commodity Prices
BERLIN, March 12 (Reuters) - Germany's IfW institute slightly lowered its 2026 economic forecast on Thursday based on expectations that commodity prices driven higher by the war in Iran will remain significantly elevated for only a few months.
"New headwinds threaten from the military conflict in Iran, which has noticeably driven up commodity prices," said the institute.
Consequences for Germany's GDP
In this scenario, a loss of purchasing power amounting to 0.6% of annual gross domestic product is projected for the current year, which will noticeably dampen economic activity but not cause it to collapse, said the Kiel-based institute.
As a result, GDP is now expected to grow by 0.8% this year, 0.2 percentage points less than what IfW had predicted in its winter forecast.
Long-Term Economic Recovery
The economy will slowly regain its footing over the course of the year, said the institute, which raised its growth forecast for next year to 1.4% from 1.3% previously.
Inflation Projections
Inflation this year, driven by higher energy prices, will rise significantly more sharply than expected in winter, reaching 2.5%, IfW said, which previously predicted 1.8%.
The inflation forecast for 2027 remained unchanged at 2.1%.
(Reporting by Miranda Murray, editing by Thomas Seythal)
Key Takeaways
- •IfW cuts Germany’s 2026 growth forecast to 0.8%, down 0.2ppts versus winter outlook, due to Iran‑war‑driven commodity price surge and 0.6% GDP hit.
- •Despite headwinds, economy expected to gradually recover through 2026; IfW raises 2027 GDP outlook to 1.4%.
- •Inflation forecast revised upward to 2.5% in 2026 (from 1.8%), while 2027 inflation unchanged at 2.1%.
- •Other institutes (DIW, IW) quantify similar energy‑price impacts: DIW sees inflation at ~2.4%, growth slightly dampened; IW warns oil price shocks could cost up to €40 bn over two years.
Frequently Asked Questions about Germany's IfW institute lowers economic growth forecast on high commodity prices
1How has inflation in Germany been affected?
Inflation is expected to rise to 2.5% in 2026, higher than the previous forecast of 1.8%, mainly due to surging energy prices.
2Will the German economy recover after 2026?
Yes, IfW forecasts economic growth to rebound to 1.4% next year, an increase from the previously forecasted 1.3%.
3Does IfW expect long-term commodity price impacts?
IfW expects elevated commodity prices to last only a few months and not cause a collapse in economic activity.