Economy: Federal government expects a stronger upswing

In 2027, the federal government expects GDP to increase by a further 1.1 percent. In 2028, things are expected to increase more slowly by just 0.6 percent.

"The German economy is on a growth path and has proven to be more resilient than expected," explained Reiche's ministry. Despite the conflict in the Middle East and increased energy prices, there was a strong recovery in the first half of the year.

The recovery is being driven primarily by the state's debt-financed investments in infrastructure and the upgrading of the Bundeswehr, but also by momentum from foreign trade.

“Private consumption, on the other hand, is likely to initially develop subdued despite ongoing real wage increases as a result of the energy price-related increase in consumer prices,” it said. For comparison: The ministry expects a strong increase of 2.6 percent in government consumption this year, but only an increase in private consumption of a meager 0.3 percent. Private investments are also only expected to gradually recover over the next year.

According to the autumn forecast, how the economy continues depends largely on the course of the wars in Iran and Ukraine. A sustainable solution to these crises, which should also lead to falling energy prices, would accelerate the recovery, the ministry explained. Conversely, persistently high raw material and energy prices could place greater strain on companies and consumers.

The ministry had previously only expected growth of 0.5 percent for 2026 and expected growth of 0.9 percent for 2027. Most recently, the leading economic research institutes also increased their estimates in their autumn report. Government advisors also predict 1.3 percent growth this year and expect GDP to increase by 1.1 percent in 2027. However, the institutes only forecast an increase of 0.4 percent for 2028.