Germany’s five major economic research institutes are assessing the effect of the Iran war on its economy with differing severity.
According to the Friday issue of “Frankfurter Allgemeine Zeitung”, preliminary estimates by the Ifo Institute in Munich and RWI in Essen suggest the conflict could depress German GDP growth by almost 0.2 percentage points this year.
In Berlin, the German Institute for Economic Research (DIW) bases its outlook on current oil‑ and gas‑market forward curves and projects a small hit of 0.1 to 0.2 percentage points to growth. Even with an expected increase of about 1 %, these negative spill‑overs are not expected to wipe out Germany’s moderate recovery.
DIW and RWI also see inflation rising by 0.4 to 0.5 percentage points, while Ifo preliminarily adds 0.2 percentage points. Stefan Kooths, chief economist at the International Institute for Economics Policy (IfW) in Kiel, remarked that the immediate consequences for the German economy are not severe as long as the conflict stays limited to a few months. “The Iran conflict does not yet justify a significant revision of economic forecasts” he said, describing the impact as “manageable dampers”.
Despite the war, Oliver Holtemöller from the Halle Institute for Economic Research (IWR) maintains the view of a fragile recovery and notes that energy supply does not seem to be the main problem.
Thus far, the institutes largely see the Middle‑East conflict as a cost shock. Geraldine Dany‑Knedlik from DIW warned that the situation becomes truly critical only when it turns into a genuine oil‑and‑transportation shock-e.g., if the Strait of Hormuz remains disrupted for an extended period. Timo Wollmershäuser of Ifo added that if crude and natural‑gas prices remain at their elevated levels for just a few months because the conflict ends quickly, the impact on Germany would likely stay modest.