The federal government is expecting a significant upswing in the German economy. It has raised its economic forecast and expects growth of 1.3 percent this year, as Katherina Reiche's (CDU) ministry announced on Thursday. In April, the government scaled back its expectations and expected an increase of 0.5 percent - so it is now much more optimistic.
The consequences of the Iran war and the sharp rise in energy prices initially had a significant impact on the economy. However, the German economy has proven to be more resilient than expected, the Ministry of Economic Affairs said. Exports as well as government investments and higher defense spending are cited as the main reasons for the growth.
Important signal
“We have left the bottom behind us, the German economy is growing again,” said department head Katherina Reiche. "This is an important signal, but it is only the beginning." Now it's about turning the recovery into economic dynamism. “Our claim is clear: Germany must get back to the top,” said the CDU politician. There must be further reforms for this.
German exporters benefited from a "special development" in the second quarter: "In view of global bottlenecks, inventories of energy-intensive goods that were produced in Germany took place." At the same time, the special fund for defense and infrastructure is having an impact.
“Homework” for Germany
Federal Economics Minister Reiche had already emphasized the need for structural reforms the day before the publication of the so-called autumn projection. The CDU politician said in the Bundestag that growth is still on shaky ground. "The situation remains fragile." Germany is burdened by external crises such as the Iran conflict. "But above all, we also have homework to do."
The shackles need to be released, said Reiche. She cited more flexible working hours, stabilization of social security contributions, less bureaucracy and competitive energy prices. The black-red coalition is facing groundbreaking weeks. Measures on the labor market and the planned pension reform are politically controversial.
Better numbers also expected for 2027
For 2027, the ministry raised its forecast from 0.9 to 1.1 percent. "Further economic development depends significantly on the course of the geopolitical conflicts in the Middle East and Ukraine," it explained. "A sustainable solution to these crises, which should also lead to falling energy prices, would accelerate the recovery."
However, continued high prices would burden companies and private households. The federal government is forecasting growth of just 0.6 percent for 2028.
Upswing “bought at a high price”
In view of the growth expectations, the Chamber of Commerce warned against excessive optimism. "The development of exports remains without its own dynamic. Trade policy uncertainties and structural locational disadvantages are once again slowing down the export industry," complained the head of foreign trade at the German Chamber of Commerce and Industry (DIHK), Volker Treier.
DIHK general manager Helena Melnikov warned: “This upswing has come at a high price.” It is based primarily on increasing exports to the EU internal market and on debt-financed government spending. "Without substantial economic policy reforms, this upswing will only have a short shelf life." Lower costs, less bureaucracy, faster procedures and more modern infrastructure are needed.
Schnitzer: The private sector also has to invest
The chairwoman of the Economic Advisory Council, Monika Schnitzer, said in an interview with tagesthemen that there will only be lasting growth if the private sector also invests after the state. This requires a safe environment, planning and structural reforms. Schnitzer called for far-reaching changes, especially with regard to health and care reform, in order to make the systems future-proof.
