Economic experts raise growth forecast – and warn of high debts

The economists are significantly increasing their economic forecast and believe the German economy will experience noticeable growth for the first time since 2022. Despite increased energy prices, gross domestic product (GDP) will rise by 1.3 percent this year and increase by a further 1.0 percent in 2027, the Economic Advisory Council said in its annual report on Wednesday.

The five economists also predict a noticeable increase in inflation for Germany. Annual inflation is expected to climb from 2.2 percent last year to 2.8 percent and even accelerate to 3.3 percent in 2027.

The economists therefore have almost the same growth expectations as the federal government and the leading economic research institutes up to 2027. In May, the economists had only expected a GDP increase of 0.5 percent for this year and a plus of 0.8 percent for 2027. They justified the significant increase in the forecast by saying that exports were going better than expected in the spring.

“In the current year, exports and government consumer spending in particular are supporting overall economic development,” explained the top economists. Next year, government and private consumer spending as well as public sector investments are expected to contribute to GDP growth.

“Despite the economic recovery, Germany’s public finances are increasingly under pressure,” emphasized the experts. In the medium term, foreseeable expenditure in the federal budget and social security funds significantly exceeded income.

“A limit on the increase in spending in the federal budget is inevitable,” warned Monika Schnitzer, chairwoman of the Council of Experts. “Consolidation should be designed to protect growth and the burden should be distributed fairly between generations and social groups.”

The federal government's net borrowing will increase significantly by 2030 due to the additional "special funds" and, above all, increased defense spending and will remain at a high level for a longer period of time - if it is not possible to reduce the so-called sectoral exception for defense. “This means that the debt ratio and interest expenses will also increase.”