Germany: Growth hit by energy shock – Commerzbank

Commerzbank’s Chief Economist Dr. Jörg Krämer argues that the sharp fall in the Ifo Business Climate Index underlines how severely the energy price shock is weighing on the German economy. He estimates German growth in 2026 will be around 0.6%, or just 0.3% adjusted for working days, and warns that prolonged closure of the Strait of Hormuz raises recession risks.

Ifo slump signals weaker German growth

"The sharp decline in the Ifo Business Climate Index (84.4 from 86.3) clearly shows how hard the energy price shock is hitting the German economy. Growth this year is likely to be a significant 0.4 percentage points lower even if the Strait of Hormuz reopens at the end of May after a total of three months. Under this scenario, we expect growth of only 0.6%. Adjusted for the unusually high number of working days, this corresponds to a meager increase of 0.3%. But every additional day without oil shipments through the Strait of Hormuz increases the risk of recession."

"All in all, the strong fiscal stimulus of 0.8% of GDP is largely neutralized by the lack of broad-based reforms, Trump’s tariff hikes, and the energy price shock. We therefore lowered our 2026 forecast for Germany to 0.6% four weeks ago. Adjusted for the unusually high number of working days, this corresponds to growth of only 0.3% which de facto means stagnation. The risk of recession rises with every day that the Strait of Hormuz remains blocked."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)