Germany's top five economic research institutions raise Germany's GDP growth forecast

(Deutsche Welle Chinese website) The joint autumn report released by Germany's five major economic research institutions on September 24 raised the growth forecast for Germany's gross domestic product (GDP) this year to 1.3% and the growth forecast for 2027 to 1.1%. In April this year, economists and government advisers had expected GDP to grow by only 0.6% in 2026 and 0.9% in 2027.

Oliver Holtemöller, head of economic forecasting at the Halle Institute of Economics, said that the current German economic situation is "not as bad as public sentiment reflects" and that both businesses and consumers need to increase their confidence. "The economy is developing better than expected," he said when explaining the upward revision of economic growth forecasts for 2026 and 2027.

Economists said both exports and manufacturing output showed unexpectedly strong growth in the first half of the year. “The main drivers are a solid global economy and the AI craze sweeping the world.”

At the same time, the German government's expansionary fiscal policy to expand infrastructure and defense investment through debt financing has also provided support for economic recovery.

Recovery is still weak and structural problems need to be solved

However, Holtmoeller also mentioned that Germany’s current “growth momentum is not strong.” Due to high energy prices and structural problems, the foundation for economic recovery is weak.

Agencies expect economic growth to be only 0.4% in 2028. Stefan Kooths of the Kiel Institute for the World Economy said that the current problems are mainly structural, so reforms are imperative.

Coos criticized that the government should not introduce reform packages every quarter and then withdraw them. He said that the current unclear economic policies of the German government have exacerbated the overall weakness of the German economy.

The joint economic forecast report is titled "Economic Recovery Accompanied by Structural Problems: Fiscal Policy Goes astray." This report was commissioned by the German Federal Ministry of Economics and jointly prepared by the Ifo Institute of Economic Research in Munich, the German Institute for Economic Research in Berlin (DIW), the Leibniz Institute for Economic Research in Essen (RWI), the Kiel Institute for World Economics (IfW) and the Halle Institute for Economic Research (IWH).

Germany faces two major challenges

Holtmoeller said Germany faces two major challenges, an aging population and rising energy costs, and if the government does not address these issues, the situation is unlikely to get better.

Many economists worry that in the absence of sustainable structural reforms, new debt to support infrastructure and defense spending will only bring short-lived economic stimulus.

Holtmoeller pointed out that Germany’s future mid- to long-term economic growth will inevitably slow down simply due to demographic factors such as the aging of the population.