German think tank IMK lowers growth forecasts for this year and next, citing energy shock as the main cause

(1) The Institute for Macroeconomic Policy (IMK) in Germany stated that Germany's economic growth for this year and next year will be lower than previously expected due to the impact of energy price shocks caused by the Iran war, which have suppressed consumption and investment. (2) IMK forecasts GDP growth of 0.6% in 2026 and 0.9% in 2027, down 0.3 and 0.7 percentage points respectively compared to the March prediction. The projection assumes that the conflict does not further escalate and that transportation through the Strait of Hormuz will return to normal later this year. (3) The IMK director noted that although the economic loss is significant, as long as the conflict does not persist for several months, it remains within a controllable range. Inflation is expected to average 2.8% in 2026 (falling to 2.3% in 2027), with rising energy prices dampening consumption, but increased public investment should support growth next year. The institute urged the European Central Bank to avoid sharp interest rate hikes, arguing that if the energy shock is only temporary, a recession induced by monetary policy would not help solve the problem.