German Institute Raises 2026 Growth Forecast to 1.2% on Stronger Exports
Citing stronger-than-expected exports and higher first-half government spending, the German Economic Institute raised its 2026 German growth forecast to nearly 1.2% from May's 0.4%.
EUROPEAN UNION,ECONOMY
Global N Press
9/22/20262 min read
BERLIN, September 20, 2026 — The German Economic Institute (IW) has raised its forecast for Germany’s economic growth in 2026 to nearly 1.2%, from 0.4% in its May projection, citing stronger-than-expected exports and increased government spending in the first half of the year. The upgrade follows similar revisions by other major German economic institutes, although IW warned that the recovery could lose momentum in the second half of the year as high energy costs, weak private investment and a softer labor market weigh on economic activity.
Exports and Public Spending Drive Upward Revision
IW expects Germany’s real exports to rise 2.8% in 2026, while imports are forecast to increase by about 2%. The institute said stronger exports were a major factor behind the economy’s better-than-expected performance in the first half.
However, IW cautioned that part of the recent export strength was linked to second-quarter inventory effects and may not be sustained. Structural pressures, including high production costs, trade uncertainty and competition in international markets, continue to affect Germany’s export outlook.
Other research institutes have also raised their forecasts. The German Institute for Economic Research (DIW) expects 1.2% growth in 2026, while the Macroeconomic Policy Institute (IMK) has forecast 1.3%. Both cited stronger exports and expansionary fiscal policy as important factors supporting the recovery.
Energy Costs and Domestic Demand Remain Risks
Despite the improved annual outlook, IW expects economic momentum to weaken later in 2026. High energy costs are increasing pressure on businesses and households, while subdued private investment and declining employment could limit domestic demand.
Germany’s Federal Ministry for Economic Affairs said in September that economic momentum had begun to weaken at the start of the third quarter. It reported that industrial production fell 1.1% from June to July, while inflation rose to 2.9% in August, driven in part by higher energy prices.
IW expects private consumption to increase by only 0.3% in 2026, with inflation remaining above 2.5%. Higher prices could therefore continue to constrain household purchasing power even as overall output recovers.
Recovery Faces Structural Challenges
IW expects Germany’s economic growth to slow to about 1% in 2027. The forecast suggests that stronger public spending and exports are providing near-term support, but the recovery has yet to become broadly based across domestic demand.
DIW similarly warned that high gas prices and structural weaknesses could weigh on the economy in the second half of the year, while declining competitiveness in some key export markets remains a longer-term challenge.
As the European Union’s largest economy, Germany has a significant role in the region’s manufacturing, trade and investment. The latest forecasts point to an improved near-term outlook, while highlighting continued risks from energy prices, weak investment and international competition.
