Germany halves GDP forecast for 2026 due to impact of Iran war

Germany’s government on Wednesday halved its economic growth forecast for 2026, as escalating tensions in the Middle East pushed energy prices higher and weighed on Europe’s largest economy.

The government now expects gross domestic product (GDP) to expand by just 0.5 percent this year, down from a 1 percent projection in January, according to its latest economic outlook. To cushion the blow, the government has announced measures including temporary fuel tax cuts and financial support for employees.

However, Economy Minister cautioned that such steps can only offer short-term relief and will not address Germany’s deeper structural weaknesses, calling for reforms to reduce tax burdens, cut energy costs and streamline bureaucracy.