Germany’s economic recovery is expected to remain weak next year, as exports continue to struggle and global trade loses momentum. This outlook comes from a new forecast by the German Economic Institute (IW), shared with Reuters on Friday.
According to the IW, Germany’s real GDP will grow only slightly this year, rising by just 0.1%. Growth is projected to reach 0.9% in 2026, marking a noticeable improvement after two consecutive years of economic contraction.
However, the IW noted that nearly one-third of this increase will result from a calendar effect. In 2026, the economy will benefit from almost two-and-a-half additional working days compared to 2025.
Germany’s economy ministry updated its projections in October. It raised the 2025 growth outlook to 0.2% and expects the economy to expand by 1.3% in 2026.
The IW also highlighted the growing impact of U.S. tariff measures and rising geopolitical tensions. After world trade is expected to rise by 4.5% in 2025, it is projected to slow sharply to only 1.5% in 2026.
Weak foreign trade continues to pressure private sector investment in Germany. At the same time, government investment initiatives are unlikely to contribute significantly next year, the institute added.
Still, combined private and public investment is forecast to add half a percentage point to overall growth in 2026.
Consumer spending is also expected to stay below potential. Even though inflation is stabilising around 2%, the IW said that subdued employment prospects will continue to limit household demand.
