BERLIN, March 11 (Reuters) - A rise in energy prices from the war in Iran and the United States' "erratic" trade policies are expected to dampen Germany's economic recovery only slightly this year, Germany economic research institute DIW said on Wednesday.
The institute, one of Germany's main economic forecasters, expects the country's gross domestic product to increase by 1% this year and by 1.4% in 2027, after 0.2% growth in 2025.
A recovery was continuing in early 2026 thanks to strong public consumption
and a gradual pick-up in government investments – initially in defence and later in infrastructure - the institute said.
A decision by the U.S. Supreme Court to strike down many of President Donald Trump's tariffs has had no noticeable impact on German exports so far due to Trump's subsequent introduction of a 150-day global 10% levy, the institute said.
Meanwhile, a recent rise in energy prices as a result of an escalating conflict in the Middle East is significantly lower than during the energy crisis of 2022-2023, DIW said.
Assuming that the strongest surge in prices is behind us and oil and gas prices will only rise moderately, those may add 0.4 percentage points to inflation this year and dampen growth by 0.1 to 0.2 points, the institute said.
"Overall, this will slow down the recovery of the German economy, but it will not stop it," said DIW.
It forecast an inflation rate of 2.4% for 2026, and of 2.3% for next year, as it foresees no further interest rate hikes by the European Central Bank.
(Reporting by Linda PasquiniEditing by Ludwig Burger)
