The leading German economic research institutes have significantly increased their growth forecast for the current year: They expect gross domestic product (GDP) to increase by 1.3 percent, as they explain in their joint autumn forecast.
The economic recovery would therefore be stronger than expected in the spring - at that time the forecast was 0.6 percent.
Exports increased sharply
The institutes explained that exports and value creation in the manufacturing sector in particular had increased “surprisingly strongly”. Impulses came from the robust global economy and the global boom in artificial intelligence (AI). Competitors from the Gulf region also had significant production problems because of the Iran war.
The energy price shock associated with the war had slowed the German economy, but the higher prices for fuel and heating oil had so far had little impact on other consumer prices, it said.
Overall recovery but weak
Nevertheless, the recovery remains weak overall, the economic researchers emphasized. The upswing is “on a thin foundation because high energy prices and structural problems are a burden,” explained Oliver Holtemöller from the Leibniz Institute for Economic Research in Halle. In the current quarter, low water levels are also temporarily slowing activity.
For 2027, the institutes now expect an increase of 1.1 percent instead of 0.9 percent, but for 2028 only an increase in GDP of 0.4 percent - then "the expansion will lose speed".
Warning against populism
With a view to the recent elections in Germany, the economic researchers also warn against "politics that are in some cases more populist", which could impair the attractiveness of the location for well-qualified employees and exacerbate the labor shortage.
Political uncertainty has increased in connection with the recent elections and the formation of governments, said Holtemöller. Above all, it remains to be seen what consequences this will have for the economic policy reform agenda.
The AfD became the strongest force in the state elections in Saxony-Anhalt and Mecklenburg-Western Pomerania. The CDU and SPD, which govern the federal government, suffered heavy losses. In the SPD, the federal government's reform course is increasingly being questioned.
Companies are also more confident again
Despite existing uncertainties, the mood among companies in Germany also improved in September. They assessed their current business situation more positively and their expectations also brightened further, as the ifo Institute announced.
The business climate index rose from 88.8 points in August to 89.9 points. “The German economy is continuing its recovery,” explained Ifo President Clemens Fuest. “Companies have apparently shaken off the recent massive increase in energy prices,” said Commerzbank chief economist Jörg Krämer. The German economy is “more resilient than expected”.
“The summer was difficult because of the heat and dryness, but the production losses should be made up for in the fourth quarter,” emphasized Ulrich Kater, chief economist at Dekabank. The economic reforms have now been "discussed to such an extent" that they are no longer of much use as a mood booster. “Companies are adapting more to the reality, and it is mixed,” says Kater.
Outlook better than current situation
In the manufacturing sector, expectations in particular brightened significantly. However, companies rated the current situation somewhat worse. There is still dissatisfaction with the order backlog. The automotive industry in particular continues to move “into difficult terrain,” the Munich institute continued.
The index also increased in trading: traders assessed their current situation more positively and their expectations also improved. However, retailers remain cautious in view of rising inflation.
Fewer employed people in the coming years
Despite the expected economic recovery, the number of employed people in Germany is likely to decline this year and next. According to a forecast by the Institute for Labor Market and Occupational Research (IAB), employment will fall by around 210,000 people in 2026 and by a further 140,000 in 2027.
The main reason for the decline in employment is demographic change and thus the aging of society. “2026 will be the first year since the global financial crisis in 2009 in which employment subject to social security contributions will no longer grow,” said Enzo Weber, head of the responsible IAB research department. The number of employees subject to social security contributions is likely to fall by 70,000 to 34.89 million this year.
The researchers expect a further decline of 40,000 by 2027. The number of unemployed is also likely to rise slightly initially. The IAB expects an increase of 50,000 unemployed this year and a further 20,000 unemployed next year.
