By Maria Martinez
BERLIN, April 24 (Reuters) - German business morale fell more than expected in April, posting the lowest reading since May 2020, as the Iran war threatens the long-awaited recovery of
Europe's biggest economy.
The Ifo institute said on Friday its business climate index fell to 84.4 in April from 86.3 in March. Analysts polled by Reuters had forecast a slight decline to 85.5.
"The German economy is being hit hard by the Iran crisis," said Clemens Fuest, president of the Ifo institute.
Assessments of the current situation fell to 85.4 from 86.7 in the previous month, while expectations declined to 83.3 from 85.9 in March.
In line with the decline in the Ifo index, the Purchasing Managers' Index on Thursday showed Germany's private sector contracted for the first time in almost a year in April.
SENTIMENT ERODED BY THE CONFLICT
"The German economy is losing its confidence," said Klaus Wohlrabe, head of surveys at Ifo.
Business morale declined across all sectors, the survey showed.
"With the on-again, off-again nature of the Iran conflict, sentiment continues to suffer significantly," said Alexander Krueger, chief economist at Hauck Aufhaeuser Lampe.
He warned that if energy prices remain high or rise further, the economy will slide closer to stagnation.
Germany's economy ministry cut its growth forecasts for 2026 and 2027 and raised its inflation projections on Wednesday.
Joerg Kraemer, chief economist at Commerzbank, said growth this year is likely to be a substantial 0.4 percentage points lower even if the Strait of Hormuz reopens at the end of May.
"But every additional day without oil shipments through the Strait of Hormuz increases the risk of recession," Kraemer said.
(Reporting by Maria Martinez, Linda Pasquini, Klaus Lauer and Reinhard Becker, editing by Miranda Murray and Gareth Jones)
