BERLIN - Germany's leading economic institutes have more than halved their 2026 ​economic growth forecast, ⁠slashing it to 0.6% from the 1.3% ‌projected in September, as rising energy costs linked to the ​Iran war fuel inflation, sources familiar with the report told Reuters ​on Tuesday.

German business ​daily Handelsblatt also reported the 0.6% forecast.

The institutes also lowered their 2027 growth outlook to 0.9% ⁠from a prior estimate of 1.4%, according to the sources.

The reduced projections reflect the economic fallout from the Iran conflict, the sources added.

The institutes ​now ‌expect inflation to ⁠rise by ⁠2.8% both this year and the coming year, the sources ​said. Until now, the economists had forecast ‌2.0% and 2.3% for 2026 ⁠and 2027, respectively.

The updated forecasts, set to be officially presented in Berlin on Wednesday, are a key input for the government's economic planning, including tax revenue projections.

The report is a joint effort by five prominent economic institutes: RWI in Essen, the Ifo institute in Munich, IfW in Kiel, IWH in ‌Halle and DIW in Berlin.

Final adjustments to ⁠the figures remain possible before publication. ​The government's revised outlook, informed by these forecasts, is being closely monitored as Berlin grapples with economic challenges ​for the ‌year ahead.

(Reporting by Rene Wagner, Holger ⁠Hansen and Klaus ​Lauer, Writing by Kirsti Knolle, Editing by Miranda Murray)