German institutes raise 2026 growth forecast to 1.3 pct

BERLIN, Sept. 24 (Xinhua) -- Germany's leading economic institutes on Thursday raised their growth forecast for the country's economy this year to 1.3 percent, up 0.7 percentage points from their spring projection, citing a stronger-than-expected recovery in the first half of 2026.

The German economy has been on an upswing since late 2025, with exports and manufacturing value added performing strongly in the first half of this year, the institutes said in their joint autumn forecast.

People shop at a supermarket in Berlin, capital of Germany, April 3, 2024. (Xinhua/Ren Pengfei)

The stronger recovery was supported by resilient global growth and the worldwide artificial intelligence boom, they added.

"However, the recovery rests on a narrow foundation, as high energy prices and structural problems continue to weigh on economic activity," said Oliver Holtemoeller, head of macroeconomic forecasting at the Halle Institute for Economic Research, one of the institutes that prepared the report.

Growth is expected to slow temporarily in the third quarter to just 0.1 percent from the previous quarter, as low water levels in summer hampered industrial production and higher energy prices continue to erode household purchasing power.

The institutes expect the upswing to continue in 2027, when gross domestic product (GDP) is forecast to grow by 1.1 percent. Growth would then slow to 0.4 percent in 2028 as population aging reduces labor supply and weighs on Germany's potential growth rate.

Inflation is forecast at 2.8 percent this year before rising to 3.2 percent in 2027 and easing to 2.0 percent in 2028, respectively, the report said.