https://hdl.handle.net/10419/209412 Sat, 24 Oct 2026 02:55:25 GMT 2026-10-24T02:55:25Z https://hdl.handle.net/10419/339638 Title: World Economy in Spring 2026: Middle East Conflict Hampers Economic Activity Authors: Gern, Klaus-Jürgen; Kooths, Stefan; Krohn, Johanna; Liu, Wan-Hsin; Reents, Jan Abstract: The world economy remained robust in 2025 despite the strains caused by the trade conflicts and the resulting increased uncertainty and entered the new year with decent momentum. However, the war with Iran now threatens to severely disrupt energy supplies, with potentially serious consequences for economic activity. It is, however, currently widely expected that production and transport of oil and gas from the Persian Gulf will return to normal levels relatively soon. In this case, which also forms the basis of our forecast, the effects would not be substantial and would be limited to a slight dampening of global production and a temporary rise in inflation. We therefore expect the global economy to remain on an upward trend, buoyed by strong impetus for trade and investment from the boom in AI technology. Monetary policy has been significantly loosened worldwide over the past year and is now supporting the economy in most countries. In addition, a number of countries are providing stimulus through fiscal policy. While the economic outlook in China remains clouded, the expansion in the United States should remain robust. In Europe, the gradual economic recovery is likely to continue from the second half of this year onwards, following a few months of slowdown caused by high energy prices. All in all, and unchanged from our forecast of last December, we expect global output - measured on the basis of purchasing power parities - to grow by 3.1 percent this year and 3.2 percent next year. However, given the uncertainty surrounding the developments in the Middle East, there is a significant risk of a considerable slowdown in the global economy. Thu, 01 Jan 2026 00:00:00 GMT https://hdl.handle.net/10419/339638 2026-01-01T00:00:00Z https://hdl.handle.net/10419/341658 Title: German economy in summer 2026: Modest momentum amid elevated risks Authors: Boysen-Hogrefe, Jens; Groll, Dominik; Hoffmann, Timo; Jannsen, Nils; Kooths, Stefan; Krohn, Johanna; Mentzer, Finn Abstract: The German economy is currently facing opposing forces. While expansionary fiscal policy is supporting economic activity, the consequences of the Iran war are weighing on growth. Beyond these effects, the economy is showing tentative signs of recovery, but structural impediments continue to prevent a broad-based recovery from gaining traction. This is also reflected in the unusual pattern of the emerging recovery. Unlike in previous upturns, there are so far few signs of strong growth in exports and business investment. Instead, the expansion is expected to be driven primarily by public investment and consumption, supported by the expansionary fiscal stance. The sharp rise in commodity prices following the Iran war is eroding purchasing power and is projected to push inflation up to 2.8 percent this year. Inflation is expected to remain elevated at 2.3 percent next year. Market expectations now point to considerably more persistent commodity price increases than assumed in the spring, suggesting that economic activity will continue to be affected well into next year. As a result, the drag from higher commodity prices is likely to be stronger and longer-lasting than projected in our spring forecast. Against this backdrop, we project GDP growth of 0.8 percent in 2026 and 1.0 percent in 2027. Compared with our spring forecast, we now expect weaker growth next year (spring forecast: 1.4 percent), mainly because higher commodity prices are likely to weigh more heavily on the economy and fiscal policy is expected to provide somewhat smaller impulses. Labor market conditions are expected to improve only gradually. In addition to subdued economic growth, employment is increasingly being constrained by demographic change, which is reducing the number of people available to the labor market. The expansionary fiscal stance is projected to raise the budget deficit from 2.8 percent of GDP in 2025 to 4.1 percent in 2027. Thu, 01 Jan 2026 00:00:00 GMT https://hdl.handle.net/10419/341658 2026-01-01T00:00:00Z https://hdl.handle.net/10419/341657 Title: World economy in summer 2026: Iran war still weighs on growth Authors: Gern, Klaus-Jürgen; Kooths, Stefan; Krohn, Johanna; Liu, Wan-hsin; Reents, Jan Abstract: In the spring of 2026, global growth slowed amid rising energy prices and heightened geopolitical risks,. While production in the Persian Gulf countries has slumped, the economy remained firmly on an upward trajectory in most other countries. In the United States in particular, the economy is expected to continue expanding at a largely unchanged pace. Positive momentum continues to come from the boom in AI technology, which is providing strong impetus for trade and investment. Currently, financial markets appear to continue expecting that oil and gas production and transportation in the Gulf region will soon return to normal levels. In this scenario, which is also underlying our forecast, the consequences for the global economy will remain limited, the rise in inflation temporary, and the monetary policy response moderate. However, as the conflict has now lasted significantly longer than expected in March, we have reduced our forecast for global output growth-measured in terms of purchasing power parity-for this year from 3.1 percent to 2.8 percent. For the coming year, a rebound to 3.3 percent is then expected (March forecast: 3.2 percent). The main risk to this forecast is a prolonged closure of the Strait of Hormuz meaning that oil supplies remain at their current sharply reduced levels for a significantly longer period of time, which would lead to a much more severe and prolonged slowdown in the global economy. Thu, 01 Jan 2026 00:00:00 GMT https://hdl.handle.net/10419/341657 2026-01-01T00:00:00Z https://hdl.handle.net/10419/341976 Title: German Economy in Spring 2026: Higher energy price weigh on sluggish economic momentum Authors: Boysen-Hogrefe, Jens; Groll, Dominik; Hoffmann, Timo; Jannsen, Nils; Kooths, Stefan; Krohn, Johanna; Schröder, Christian Abstract: The German economy is gradually regaining its footing. The main impulses are expected to stem from expansionary fiscal policy. However, a broad-based and strong recovery remains out of reach, as structural weaknesses-most visibly reflected in the pronounced loss of competitiveness-continue to weigh on economic activity. So far, there are few indications that firms intend to significantly expand investment or employment. Additional headwinds may arise from the military conflict in Iran, which has led to a noticeable increase in commodity prices. This forecast assumes that commodity prices-consistent with market expectations since the onset of the conflict-will remain significantly elevated only for a short period and then start to ease again. Under this scenario, the associated loss of purchasing power amounts to around 0.6 percent relative to GDP this year. While this will weigh noticeably on economic activity, it is unlikely to trigger a downturn. Against this backdrop, GDP is expected to grow by 0.8 percent this year, slightly less than projected in our winter forecast (1.0 percent). For 2027, we anticipate GDP growth of 1.4 percent (winter forecast: 1.3 percent). Inflation is projected to rise more strongly this year than previously expected, reaching 2.5 percent due to higher energy prices (winter forecast: 1.8 percent). For next year, we continue to expect an inflation rate of 2.1 percent. German exporters are likely to expand their business moderately again, although they are expected to continue losing global market shares. Investment activity will be driven primarily by additional public spending, while private investment is likely to remain subdued. Employment is expected to respond with a lag to the economic expansion and will likely begin to increase again only in the second half of this year. The public deficit is projected to rise from 2.7 percent of GDP in 2025 to 4.2 percent in 2027. Thu, 01 Jan 2026 00:00:00 GMT https://hdl.handle.net/10419/341976 2026-01-01T00:00:00Z