BERLIN, April 23 (Reuters) – The risk of Germany slipping into recession has risen sharply due to the Iran war, a study by the IMK institute seen by Reuters on Thursday showed, as higher energy prices, supply disruption and weaker sentiment cloud the outlook for Europe’s largest economy.
The monthly business cycle indicator compiled by the Institute for Macroeconomics and Economic Research (IMK) showed a 33.5% probability of recession for the second quarter, up from 11.6% at the beginning of March.
The indicator also shifted for the first time since October from “yellow-green,” signalling moderate growth, to “yellow-red,” reflecting heightened economic uncertainty.
Germany’s economy ministry cut its growth forecasts for 2026 and 2027 and raised its inflation projections on Wednesday.
IMK said the worsening outlook was driven by deteriorating financial market and sentiment indicators, including higher corporate credit risk premiums, increased stock market volatility and interest-rate developments suggesting investors expect rate tightening by the European Central Bank.
German companies’ business climate and export expectations have also worsened, partly because the global economy, especially many emerging markets, is being hit by the Iran war, IMK said.
IMK researcher Thomas Theobald said U.S. and Israeli attacks on Iran had increased the likelihood of production declines, especially in Germany’s energy-intensive industries.
(Reporting by Klaus Lauer, writing by Maria Martinez, Editing by Madeline Chambers)
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