IMF drops German growth forecast as uncertainty hampers global economy

The International Monetary Fund (IMF) on Wednesday lowered its forecast for economic growth in Germany this year, even as the global economy appears to be recovering from the war in the Middle East. 

German gross domestic product (GDP) is expected to rise just 0.7% in 2026, down 0.1 percentage point from the Washington-based organization's last quarterly forecast in April. 

The export-led German economy has been impacted hard by soaring energy prices due to the US-Israeli war in Iran and Tehran's blockade of the Strait of Hormuz, a crucial waterway for the global oil and gas trade. 

Looking ahead to 2027, the IMF expects Germany's GDP to climb 1%, down from 1.2% in the last forecast. 

While the outlook for Germany remains subdued, a more optimistic picture is emerging for the global economy. 

The IMF cut its forecast for worldwide growth this year to 3%, down 0.1 percentage point, but it predicted GDP growth would reach 3.4% in 2027, up 0.2 percentage points from the previous forecast. 

However, renewed strikes between Washington and Tehran overnight could cast a shadow over global hopes for an economic bounce-back. 

In its forecasts, the IMF assumed that the Strait of Hormuz would be fully reopened in mid-July under the terms of the US-Iran ceasefire deal, and that ships would gradually be able to pass through again. 

"The possibility of renewed Middle East conflict looms large and could extend commodity price volatility, further threaten supply chains, raise prices, and weigh on financial conditions," the IMF said.