German economic institutes nearly double 2026 growth forecast to 1.3% amid reform calls

Germany’s leading economic research institutes nearly doubled their 2026 GDP growth forecast for the country, raising it from 0.6% to 1.3%, with the 2027 outlook also revised upward from 0.9% to 1.1%, according to a joint report published on Saturday. The OECD similarly lifted its 2026 growth estimate to just over 1%. Business sentiment data reinforced the shift, with the Ifo economic climate index rising to 89.9 points in September from 88.8, exceeding market expectations of 89, while the expectations subindex climbed to 90.4 and current conditions improved to 89.5.
The institutes cautioned that the recovery remains narrowly based, driven by public spending, investment, and a modest pickup in consumption, while industry continues to struggle with high energy costs and structural challenges. Inflation is projected at 2.8% in 2026 and 3.2% in 2027, with growth expected to slow to 0.4% by 2028.
The improved outlook follows years of downward revisions, with the latest forecasts marking a rare upward correction. The September PMI had already signaled a potential exit from prolonged stagnation for Europe’s largest economy .
In Berlin, economist Leszek Balcerowicz proposed structural reforms to sustain momentum, emphasizing the need to unlock private capital for innovation and remove market entry barriers to boost competition. Speaking at a Friedrich Naumann Foundation event earlier this month, Balcerowicz argued that Germany’s strength in research and patents must be paired with venture capital to scale new businesses, rather than relying on state funding .
WELT separately noted that Germany’s economic future hinges on politically sensitive reforms, including labor market expansion, increased immigration, or raising the retirement age, as inaction risks deeper stagnation .
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