German government raises growth forecasts for 2026 and 2027

The German ​government has raised its economic ​forecasts for this year ‌and next ​year, as the Iran war is not hurting the economy as much as feared, ‌the economy ministry said on Thursday.

The government has raised the forecast for economic growth to 1.3% in 2026 and 1.1% in 2027, confirming the ‌Reuters report on October 1. It expected 0.5% growth for ‌2026 and 0.9% for 2027 in its April forecasts. The new government forecasts are in line with those of Germany's leading economic institutes.

For 2028, the government expects growth ⁠of ​0.6%. Any pickup would ⁠be welcomed by Chancellor Friedrich Merz after Germany's sluggish economy proved a sore ⁠point in September's regional elections that resulted in big gains for the far right ​and far left.

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. 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.

The war in the Middle East is ⁠affecting many ⁠consumers primarily through inflation. The government expects inflation to reach 2.7% in 2026 and 3.0% in 2027, before ‌easing to ‌2.2% in 2028.