Kai Co Macro: The energy crisis poses a risk to Germany's economic recovery, although to a lesser extent than in 2022.

Franziska Palmas of Oxford Economics stated in a report that the decline in business sentiment indicates that energy shocks could jeopardize Germany's economic recovery hopes. The Ifo business climate index fell from 88.4 in February to 86.4 in March. Palmas said, "This decline was entirely driven by the expectations component, which likely reflects concerns about rising energy prices and the wider impact of the Middle East conflict." However, compared to the energy shock in 2022, Germany appears to be more resilient. Palmas noted that so far, price increases have been relatively small, and many energy-intensive industries have already lost competitiveness since then. "Compared to most other eurozone countries, Germany also has more room for loosening fiscal policy." Nevertheless, Oxford Economics has revised down its GDP forecast for 2026 from 0.8% to 0.5%.