Germany's IW institute now expects the economy to grow nearly 1.2% in 2026, nearly triple its May projection of 0.4%. Stronger exports and government spending drove the first-half rebound, but IW warns the momentum will fade in the second half.
The German Economic Institute (IW) raised its 2026 growth forecast to nearly 1.2%, up sharply from the 0.4% it projected in May. Reuters reported the revision on Sunday, citing forecasts seen ahead of publication. Stronger exports and government spending in the first half of the year drove the upgrade.
IW is not alone. The Ifo, DIW, RWI and IMK institutes have also recently raised their forecasts, following a stronger-than-expected first half.
Exports carried the first-half rebound
IW said real exports would rise 2.8% this year while imports climb 2%, after goods exports rose sharply in the second quarter, partly because of inventory effects.
The institute cautioned that the export boost was likely temporary. Structural pressures — including high production costs, protectionism and Chinese competition — remain in place.
Momentum set to fade
IW warned that growth would slow as high energy prices, weak private investment and job losses weigh on demand in the second half of 2026. It forecast slower growth of nearly 1% for 2027, with consumption and investment each contributing about half of that expansion.
Private consumption is expected to rise just 0.3% in 2026, as inflation above 2.5% erodes household purchasing power.
Source: Investing.com
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