Germany's Economy Recovers... 2026 Growth Forecast Raised from 0.5% to 1.3%

▲ A gas station in Germany

The German government has significantly raised its economic growth forecast for this year from the previous 0.5 percent to 1.3 percent.

In its autumn economic outlook released on October 8 (local time), the German Federal Ministry for Economic Affairs and Energy adjusted the forecast, stating, "The economy is on a growth path and showing stronger resilience than expected."

The growth forecast for next year was also revised upward from 0.8 percent to 1.1 percent.

However, growth is expected to slow to 0.6 percent in 2028.

The government views trade and public spending, such as defense investments, as driving the growth.

It judged that the Middle East conflict, initially expected to hold back the economy, actually acted as a favorable factor for exports such as steel and fertilizers.

"Faced with global supply chain disruptions, inventory replenishment for German energy-intensive goods took place," said Katherina Reiche, Minister for Economic Affairs and Energy.

The government projected that this year's exports will increase by 3.7 percent and public spending by 2.6 percent compared to last year, leading the economic recovery, while private consumption will grow by a mere 0.3 percent due to the fallout from inflation.

Consumer price inflation is forecast to rise by 2.7 percent year-on-year this year and 3.0 percent next year.

The government noted that future economic prospects will heavily depend on the wars in the Middle East and Ukraine, warning that "if raw material and energy prices remain at high levels, businesses and households could bear a greater burden."

After recording -0.9 percent in 2023 and -0.5 percent in 2024, Germany's economic growth rate rose to 0.2 percent last year, narrowly avoiding negative growth for three consecutive years.

Nevertheless, the business community pointed out that it will be difficult to sustain the recovery unless fundamental factors holding back the economy—such as high energy costs, tax burdens, and bureaucracy—are eliminated.

"This economic recovery comes at a high price," analyzed Helena Melnikov, Managing Director of the Association of German Chambers of Commerce and Industry (DIHK). "It is based on increased exports within the European Union (EU) internal market and government spending funded by debt."

She added, "The actual growth engine has stalled, and private investment and domestic consumption are struggling to revive."

(Photo: AP, Yonhap News)

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