German gov't raises 2026 growth forecast to 1.3 pct

BERLIN, Oct. 8 (Xinhua) -- The German government on Thursday sharply raised its economic growth forecast for 2026 to 1.3 percent from 0.5 percent, citing stronger-than-expected economic resilience despite rising energy prices and geopolitical uncertainty.

Vehicles run on a bridge in Berlin, Germany, on Jan. 15, 2024. (Photo: Xinhua)

Germany's economy, Europe's largest, is expected to continue recovering this year, driven mainly by exports and public spending, according to the government's autumn economic forecast presented by Economy Minister Katherina Reiche.

The economy expanded at a relatively strong pace in the first half of 2026 despite the conflict in the Middle East and higher energy costs, with exports and government consumption providing the main impetus, Reiche said.

However, the recovery is expected to remain uneven. Private consumption is likely to stay subdued as energy-driven inflation erodes purchasing power, while weak capacity utilization and geopolitical uncertainty continue to weigh on private investment, she added.

The government expects economic growth to slow to 1.1 percent in 2027 and further to 0.6 percent in 2028.

It warned the outlook would depend heavily on developments in the Middle East and Ukraine. A lasting resolution of the conflicts could accelerate the recovery by bringing down energy prices, while prolonged conflicts could put further pressure on businesses and households.

The German Chamber of Commerce and Industry (DIHK), however, warned that the recovery could prove short-lived without substantial economic policy reforms.

"This upswing comes at a high cost," Helena Melnikov, DIHK's chief executive officer, said in a statement.

Melnikov added that the recovery was driven largely by rising exports to the EU single market and debt-financed government spending, while key growth engines such as private investment and domestic demand remained weak.

Official figures had pointed to signs of a recovery in Germany's economy this year, with gross domestic product expanding by 0.4 percent in the first quarter and 0.3 percent in the second quarter compared with the preceding three months.

However, the country's five leading economic research institutes forecast in late September that growth would slow to just 0.1 percent quarter-on-quarter in the third quarter, pointing to a temporary slowdown in the recovery.