EXCLUSIVE-German government raises forecasts for 2026 and 2027, source says

The German government has raised its ​economic forecasts, a person ‌familiar with ​the draft told Reuters on Thursday, as the Iran war is not hurting the economy as much as feared. The government ‌has raised the forecast for economic growth to 1.3% in 2026 and 1.1% in 2027. It expected 0.5% growth for 2026 and 0.9% in 2027 in its April forecasts.

For 2028, the ‌government expects growth of 0.6%. Despite higher prices due to the Iran conflict and uncertainty ‌caused by US tariffs, the German economy has shown resilience and grew by 0.3% in the second quarter.

The upturn is being driven primarily by the government's debt-financed investments in infrastructure and the strengthening of Germany's ⁠armed forces. Exports ​will also be ⁠a growth driver. According to the source, the government forecasts export growth of 3.7% this year. Growth is ⁠then expected to slow to 2.1% in 2027 and 1.1% in 2028.

Meanwhile, domestic consumption is expected to ​remain muted, with 0.8% growth forecast in 2026 and 1.1% in 2027, according ⁠to the source. The war in the Middle East is affecting many consumers primarily through inflation, especially via sharply higher petrol ⁠and ​diesel prices.

According to the source, the government expects inflation to reach 2.7% in 2026 and 3.0% in 2027, before easing to 2.2% in 2028. Several economic institutes had ⁠upgraded their economic growth forecasts for 2026 and 2027 before the government, saying higher government spending drove ⁠a stronger-than-expected recovery in ⁠the first half of the year.

The government will officially present the new forecasts on October 8. The economy ministry was not ‌immediately available ‌to comment.