Leading German institutes more than double GDP growth forecast

Leading German economic institutes have sharply improved their forecast for Europe's largest economy. In 2026, the country's real GDP, according to their new estimates, will grow by 1.3% – in spring only 0.6% was expected.

This is stated in the joint autumn forecast of German economic institutes, published on September 24. Thus, the growth estimate for the current year was raised immediately by 0.7 percentage points.

Economists explain the revision primarily by significantly better-than-expected dynamics in the first half of the year. Exports and production in the manufacturing industry grew especially strongly. The German economy has already exceeded the level recorded in 2022 before the gas price crisis.

At the same time, the institutes warn that the recovery remains relatively weak. It is constrained by high energy prices, structural problems, and a shrinking potential workforce due to demographic changes. In the third quarter, low water levels on rivers were an additional factor that made operations difficult for parts of industry.

In 2027, economists expect German GDP to grow by another 1.1%. The spring forecast predicted about 0.9%. In 2028, the pace, according to the current estimate, will slow to 0.4%.

Domestic demand, government spending on infrastructure and defense, and a revival in housing construction are expected to support the economy next year. At the same time, private investment is forecast to remain weak.

Inflation in Germany, according to the institutes, will be 2.8% in 2026 and will accelerate to 3.2% in 2027. The unemployment rate is expected to be 6.4% this year and 6.2% next year.

The joint forecast is prepared by DIW Berlin, ifo, the Kiel Institute for the World Economy, IWH, and RWI on behalf of the German Federal Ministry for Economic Affairs and Energy.

Based on materials from: Gemeinschaftsdiagnose, Tagesschau