Key insights
- The German Council of Economic Experts cut Germany's growth forecast due to the Middle East conflict, high energy prices, and US trade policy. Weaker German growth and higher inflation could negatively impact US equities, particularly those with significant European exposure. The risk scenario of $120 oil further exacerbates the situation, potentially leading to slower global growth and increased inflationary pressures, weighing on US corporate earnings and investor sentiment.
By Maria Martinez
BERLIN, May 27 (Reuters) - The German Council of Economic Experts cut its growth forecast for Europe’s largest economy on Wednesday, citing the impact of the Middle East conflict, higher energy prices and U.S. trade policy.
The economists now expect 0.5% growth this year, down from a November forecast of 0.9%, according to their spring report to the government.
For 2027, the panel forecasts growth of 0.8%.
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Higher energy prices are reducing household purchasing power and weighing on consumption, the economists said.
Inflation is expected to average 3.0% in 2026, up from 2.2% in 2025, before easing to 2.8% in 2027.
In a risk scenario in which oil prices rise to $120 per barrel and remain elevated until October 2026, the advisers said German growth could slow to 0.2% in 2026 and 0.5% in 2027, while inflation could rise further.
The council also warned that Germany’s long-running economic weakness reflected structural problems, including weaker industrial competitiveness and demographic pressures.