Ifo Institute ups German 2026 growth forecast to 1.4 per cent

Brussels – The Munich-based ifo Institute for Economic Research forecasts Germany’s gross domestic product growth at 1.4 per cent in 2026, 1.2 per cent in 2027, and 0.8 per cent in 2028. “Significant impetus from abroad and increased spending on infrastructure, climate, and defence in Germany are preventing a more severe economic slowdown due to the energy price shock and low water levels in rivers. There are rays of hope, especially for the crisis-stricken industry sector. The German economy is continuing to recover,” said Timo Wollmershäuser, Head of Forecasts at ifo.

 Compared with its previous forecast, the institute has revised its growth estimate upwards by 0.6 percentage points for this year and by 0.4 percentage points for next year, partly due to a revision of historical data by the German Federal Statistical Office. However, expansionary fiscal policy will cause the public deficit to rise sharply, from 3.0 per cent of GDP in 2025 to 4.6 per cent in 2028, whilst gross debt will rise from 62.7 per cent to 67.9 per cent of GDP over the same period. The inflation rate will rise to 2.8 per cent this year and 3.0 per cent next year. It will not be until 2028 that the inflation rate drops to 2.3 per cent, bringing it gradually closer to the European Central Bank’s target.