Germany is poised to return to growth in 2026 after years of decline, according to the latest forecasts from leading economic research institutes. However, experts warn that US trade policy continues to pose a significant risk.
The ifo Institute for Economic Research has revised its outlook for next year upwards, estimating that Germany's gross domestic product (GDP) could grow by 1.5 percent in 2026, almost double the earlier estimate of 0.8 percent. The institute also slightly raised its forecast for 2025, from 0.2 to 0.3 percent.
Economists at the Kiel Institute for the World Economy (IfW Kiel) have expressed optimism, predicting that GDP will grow by 1.6 percent in 2026, up from the previous estimate of 1.5 percent. Their forecast for the current year has also been revised upwards, from stagnation to a modest 0.3 per cent growth.
Still, the Halle Institute for Economic Research (IWH) predicts a slower recovery, estimating GDP growth of 0.4 percent in 2025 after two years of contraction and a further acceleration to 1.1 percent in 2026. "Signs of recovery in the German economy are increasing," He said Oliver Holtemoeller, Head of Macroeconomics and Vice President of IWH.
"Leading indicators support our view that after two years of contraction, the industry has bottomed out - albeit at a low level," said Stefan Kooths, Head of Forecasting at IfW Kiel.
The German economy will contract by 0.3 percent in 2023 and 0.2 percent in 2024. "The crisis in the German economy bottomed out in the winter half-year. One of the reasons for the rapid growth is the fiscal measures announced by the new German government," He said Timo Wollmershaeuser, Deputy Director of the ifo Centre for Macroeconomics and Surveys and Head of Forecasting.
Ifo said the stimulus, including higher public spending, tax breaks and investment, will reach €10 billion (CZK 259.8 billion) this year and €57 billion (CZK 1,482.7 billion) in 2026.
However, these more optimistic forecasts are based primarily on the assumption that the ongoing trade conflict between the European Union and the United States will be resolved positively. As the dispute remains unresolved, economists continue to view US trade policy as a key source of uncertainty. "A possible escalation of US trade conflicts poses a significant risk to the German economy," Holtemoeller said.
According to the ifo institute, tariff measures already introduced by the US government under President Donald Trump would reduce German GDP growth by 0.1 percentage points this year and by 0.3 percentage points in 2026. A resolution could improve growth prospects, but any escalation could risk Germany falling back into recession.
"Trade political risks remain significant," said the IfW president Kiel Moritz Schularick. "Inconsistent US tariff policy continues to increase uncertainty for German foreign trade."
Xinhua/gnews.cz - cik
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