The German government expects economic growth of 1.3% in 2026. This is according to the autumn projection of the Federal Ministry for Economic Affairs under Minister Katherina Reiche (CDU). In the spring projection, the ministry had still assumed 0.5% – a correction of 0.8 percentage points. For 2027, the ministry now expects growth of 1.1%, up from 0.9% previously. In 2028, gross domestic product is then expected to grow by only 0.6%.
“The German economy is on a growth path and has proven more resilient than expected,” the ministry explained. Despite the conflict in the Middle East and rising energy prices, there was a strong recovery in the first half of the year.
State drives, consumers brake
The recovery is mainly driven by debt-financed state investment in infrastructure and the rearmament of the Bundeswehr, but also by momentum from foreign trade. According to the draft of the autumn projection, exports are likely to grow by 3.7%, by 2.1% in 2027 and by 1.1% in 2028.
Private consumption, by contrast, remains weak. Although there are continued real wage increases, the rise in consumer prices driven by energy prices is dampening the willingness to spend. The ministry expects a strong increase of 2.6% in government consumption this year, but only a 0.3% rise in private consumption. Private investment is also likely to recover only gradually over the course of next year. The construction sector is expected to turn the corner in 2027: after years of declining investment, growth is expected from 2027 onwards.
Inflation remains high. According to the draft, the government expects an inflation rate of 2.7% in 2026, then 3.0% in 2027. In 2028, it is likely to be 2.2%. The European Central Bank aims for two percent as the optimal value for the economy; at higher values, it usually counteracts with higher interest rates.
Dependent on the wars
According to the autumn projection, how the economy develops further depends substantially on the course of the wars in Iran and Ukraine. A sustainable solution to these crises, which would also likely lead to falling energy prices, would accelerate the recovery, the ministry explained. Conversely, persistently high raw material and energy prices could put greater strain on companies and consumers.
The leading economic research institutes had already raised their estimate in their autumn report. They also forecast growth of 1.3% for this year and assume a GDP increase of 1.1% for 2027. For 2028, however, the institutes predict only plus 0.4% – somewhat less than the government. After the high debt in many policy areas, the black-red coalition has also set itself structural reforms. However, implementation keeps stalling, as manager magazin reports, citing the draft.
Outlook: The forecast stands and falls with the development of energy prices and the wars. If the conflicts do not ease, the recovery is likely to remain fragile – and private consumption will continue to lag behind state impulses.
