Economic Outlook: Between Energy Crisis and AI Boom
The Gulf conflict has driven up energy prices and pushed consumer prices higher. The shortfall in crude oil supply is currently being offset by a reduction in inventories and only to a small extent by lower consumption, as it is expected that the Strait of Hormuz will become navigable again over the course of the summer. At the same time, the AI boom continues to provide strong momentum to the global economy. East Asia supplies many of the capital goods required for artificial intelligence, while much of the investment in these facilities is taking place in the United States. Additional support to economic activity in many regions comes from increased investment in weapons systems as well as in renewable energy. By contrast, interest rate hikes in response to rising inflation are likely to have a dampening effect in many places. Domestic demand in China remains weak, and the euro area economy is struggling with intense competitive pressure from Chinese competitors and with high US tariffs.
For the German economy a moderate upturn seemed to be emerging at the beginning of the year. In the first quarter, output increased (by German standards) quite markedly, driven primarily by a rise in exports, especially to neighboring European countries. However, by the summer it has again become highly uncertain whether 2026 will be a year of recovery. Rising energy prices are increasing production costs and weighing on household incomes, while the looming energy crisis is undermining economic confidence. In addition, the number of people in employment has been declining slightly since last summer, and job losses in manufacturing have even accelerated recently. Nevertheless, a cyclical downturn is unlikely, not least because of the expansionary stance of fiscal policy. Public consumption is expected to continue to grow significantly, and public investment programmes will boost construction investment. A slight increase in exports, after three years of decline, seems probable, since last year’s US tariff hikes are unlikely to be repeated, and exports to neighboring European countries are trending upward. Private consumption is also expected to expand slightly, in line with real disposable income.
“The main risk to the global as well as to the German economy lies in the uncertain course of the Gulf conflict,” says Oliver Holtemöller, head of the Macroeconomics Department and Vice President at the IWH. If the Strait of Hormuz were to remain closed throughout the summer, crude oil would become significantly more expensive, and higher rates of inflation and interest would follow. A setback for German exports would also be likely. Under these conditions, German economic output in 2026 would, at best, stagnate. “Beyond this, the implementation of artificial intelligence entails both upside and downside risks,” adds Oliver Holtemöller. There is a chance that AI will significantly increase overall economic productivity. In the short term, however, downside risks may predominate, for example due to job losses, including among relatively highly qualified workers.
The extended version of this forecast contains two boxes (both in German):
Box 1: Artificial intelligence and the labour market: early evidence and current developments
Box 2: On the estimation of potential output
Publication (in German):
Drygalla, Andrej; Exß, Franziska; Gutsch, Alexandra; Heinisch, Katja; Holtemöller, Oliver; Kämpfe, Martina; Kozyrev, Boris; Lindner, Axel; Mukherjee, Sukanya; Sardone, Alessandro; Schultz, Birgit; Zeddies, Götz: Konjunktur zwischen Energiekrise und KI-Boom. IWH, Konjunktur aktuell, Jg. 14 (2), 2026. Halle (Saale) 2026.
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Konjunktur aktuell: Zwischen Energiekrise und KI-Boom
in: Konjunktur aktuell, 2, 2026
Abstract
Die deutsche Wirtschaft steht infolge der Energiekrise und des anhaltenden Golfkonflikts vor einer unsicheren Erholung. Steigende Kosten und eine schwächere Beschäftigungsentwicklung belasten die Konjunktur, während die Finanzpolitik stützend wirkt. Unter der Annahme stabiler Energiepreise dürfte die Produktion in diesem und im kommenden Jahr um jeweils 0,9% zunehmen; ähnliche Expansionsraten sind auch für Ostdeutschland zu erwarten.
