"While many economists believe it will return to stronger growth in 2026, hopes of a quick recovery are fading amid doubts over Berlin's planned investment spree under Chancellor Friedrich Merz. Before Christmas, Germany's Bundesbank lowered its growth forecast for 2026 to 0.6%, down from its previous June forecast of 0.7%. However, the central bank raised the forecast for 2027 to 1.3%, predicting that the pace of economic activity would pick up from the second quarter of 2026."
"Germany's ifo Institute recently downgraded its growth forecast for 2026 to 0.8%. "The German economy is adapting only slowly and at great expense to the structural shift through innovation and new business models," Timo Wollmershauser, ifo's head of forecasts, said. Germany's economy has been hit on several fronts in recent years. The Russian invasion of Ukraine exposed an overreliance on Russian gas, and pivoting away has been expensive and challenging. Meanwhile Germany's export-driven model has been compromised by US tariffs"
Germany faces a prolonged slump with recession since late 2022 and only about 0.1% growth expected for 2025. Forecasts for 2026 have been downgraded to roughly 0.6–0.8%, while the Bundesbank raised its 2027 forecast to 1.3% and expects activity to pick up from the second quarter of 2026. The outlook is weakened by doubts over planned investment under Chancellor Friedrich Merz. Structural challenges include overreliance on Russian gas and costly pivoting, export exposure to US tariffs and shifting China relations, rising competition from Beijing, deindustrialization, decades of underinvestment, rigid fiscal rules, crumbling infrastructure, and weak digitalization.
Read at www.dw.com
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