According to the Bundesbank, the German economy started the current year with a mini-growth despite many crises. “Despite ongoing stress factors and additional headwinds from the war in the Middle East, real GDP is likely to have increased slightly in seasonally adjusted terms in the first quarter of 2026,” writes the central bank in its April monthly report. The first official figures on gross domestic product (GDP) for the first three months of 2026 will be available next Thursday (April 30) from the Federal Statistical Office.
According to the Bundesbank’s assessment, rising industrial sales and goods exports suggest a slightly positive contribution to growth. In addition, survey data for March still showed an overall stable situation. “This suggests that the negative effects of the war in the Middle East will largely only be felt later,” the monthly report says.
Increased energy prices are slowing consumption
Private consumption, on the other hand, probably weakened in the first quarter of the current year. In March, the oil price shock resulting from the Iran war may have put an additional brake on consumers. In particular, gas at the gas station and heating oil became significantly more expensive. This catapulted the inflation rate in March to 2.7 percent, its highest level since January 2024.
The Bundesbank does not see any relief in the short term: “The inflation rate is likely to remain significantly elevated in the coming months. However, the duration and extent of the inflation surge depend heavily on the further development of the conflict in the Middle East.”
Gloomy prospects for the economy
The economic outlook also remains cloudy. “With a view to the second quarter, from today’s perspective, there are at most signs of further, slight expansion,” writes the Bundesbank. The government’s billions in investments in infrastructure and defense are likely to increasingly stimulate the economy. “On the other hand, it is to be expected that the effects of the war in the Middle East will have a broader and more noticeable impact on the German economy. They will have a particularly impactful effect through increased energy prices, supply chain problems, increased uncertainty, increased interest rates and worsened export prospects.”
Economists have recently lowered their economic forecasts for the current year in a row. Leading economic research institutes expect that German economic output will only increase by 0.6 percent in 2026. Before the Iran war, many experts had expected growth of one percent, or even more. In 2025, with an increase of 0.2 percent, Germany narrowly missed the third year in a row without economic growth.