Germany more than doubled its growth forecast for 2026 after a stronger-than-expected first half, as robust exports and a surge in government spending outweighed weak consumer activity. Gross domestic product is expected to expand by 1.3% in 2026 \u2014 the fastest jump since 2017 \u2014 and 1.1% in 2027, the Economy Ministry said in its autumn projection. That compares with previous estimates of 0.5% and 0.9%, respectively.
Despite geopolitical uncertainties, a global slump in energy prices, the closure of the Strait of Hormuz, and tariffs, the economy managed to embark on a recovery path during the first six months, said Economy Minister Katherina Reiche in Berlin. The forecast showed that Europe\u2019s largest economy withstood the blow of war in the Middle East better than anticipated, particularly in its core manufacturing sector.
The upgrade offers Chancellor Friedrich Merz limited breathing room after three bruising state election defeats last month. Reforms needed to put the recovery on a sustainable footing have stalled, though recent data show stabilization in the struggling manufacturing sector. The ministry expects momentum this year to be boosted by foreign trade and government debt-financed spending on infrastructure and defense.
Private consumption should remain subdued due to rising prices, however, and private investment is expected to recover only gradually. A lasting solution to geopolitical crises would accelerate the recovery, but persistently high commodity and energy prices could place a greater burden on businesses and households.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing