Germany's economy to rebound in 2026

The German Economic Institute has raised its growth forecast for the economy in 2026 to approximately 1.2%, up from the previous estimate of 0.4%, supported by increased exports and government spending in the first half of the year. Despite the improved performance, the institute warns of a potential slowdown in the second half due to rising energy prices, weak investment, and employment issues, with growth expected to slow to 1% in 2027. In that year, both consumption and investment are projected to contribute about half of the growth. The German economy relies on exports and government investment to revive growth, amid structural pressures such as rising production costs and Chinese competition, along with ongoing challenges related to increasing energy prices and the eroding purchasing power of households.

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