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Germany updates: Economy expected to see growth boom in 2026 – DW – 06/12/2025
06/12/2025
June 12, 2025 Ifo doubles growth forecast for Germany in 2026
The Munich-based Ifo Institute has raised its economic growth forecast for Germany for 2026.
Gross domestic product (GDP) is expected to grow by 1.5%, which would be almost twice as high as the originally forecast 0.8%.
The institute said new government measures and a spending surge should boost the country's sluggish economy.
The economic institute also adjusted its growth forecast for 2025, raising it to 0.3% from the previous outlook of 0.2%.
"The crisis in the German economy reached its low point in the winter half-year," said Timo Wollmershaeuser, the Ifo's head of forecasts.
"One reason for the growth spurt is the fiscal measures announced by the new German government," he added.
Germany's cabinet last week approved a €46 billion ($52.94 billion) tax relief package to support companies and boost the economy from 2025 through 2029.
That came after Germany's parliament, the Bundestag, approved a massive spending surge in March when it made a historic decision to amend a national fiscal rule known as the "debt brake."
Defense spending above 1% of GDP will no longer be subject to any borrowing limits.
In its forecast, the Ifo Institute estimated those measures to boost the economy by €10 billion in 2025 and €57 billion in 2026.
Wollmershaeuser also warned, however, that the improved forecast was largely based on assumptions that the trade war between the European Union and US President Donald Trump would be resolved.
"The increasing optimism is probably also fueled by the hope that the new coalition will end the economic policy stalemate and that an agreement will be reached in the trade dispute with the US," he said.
The institute also predicted an uptick of one percentage point this year. Wollmershaeuser pointed out that "the crisis in the German economy has been over for some time, but the recovery is still very weak."
"The economy is still struggling with the effects of the pandemic and the high inflation rate."
