BERLIN, May 27 (Xinhua) -- Germany's council of economic advisers cut its 2026 growth forecast on Wednesday, warning that the Middle East war, surging energy prices and persistent U.S. trade protectionism were placing fresh strain on Europe's largest economy after years of stagnation.

The German Council of Economic Experts, a panel of five economists appointed by the German president, said it now expected the economy to expand by just 0.5 percent this year, down 0.4 percentage points from its previous forecast issued last autumn, with the revision driven primarily by the war in the Middle East.

"After a prolonged period of weak growth since 2019, the German economy is facing increased pressure to adapt as a result of recent geopolitical developments," the council said in its spring economic outlook.

The war and the resulting sharp rise in crude oil and gas prices, along with U.S. trade policy, were weighing on economic activity and eroding purchasing power through a deterioration in Germany's terms of trade, it said.

The council warned that the main downside risk to the outlook was that the war could drag on longer and cause more severe economic disruption than currently assumed.

Germany has struggled to regain momentum in recent years as high energy costs, weak industrial output and sluggish external demand weighed on growth. The council expected that fiscal expansion measures, including large-scale infrastructure investment, could provide some cushion. It forecast a growth of 0.8 percent in 2027.

Consumer price inflation is expected to average 3 percent this year and 2.8 percent next year, both well above the 2.2-percent level recorded in 2025, driven largely by higher energy costs, according to the forecast.

The report also argued that Germany's weakness was increasingly structural rather than purely cyclical, citing declining competitiveness in industrial goods and the mounting fiscal pressure of an aging population as major long-term challenges.

The total social insurance contribution rate, which covers pension, health, long-term care, accident and unemployment insurance, stands at 42.3 percent in 2026 and could climb to nearly 50 percent by 2040 under current legislation, the council said.

Rising contribution rates would squeeze households' disposable income, dampen consumption and work incentives, and lift labor costs for employers, weighing on hiring and investment, it added. ■