Germany’s leading economic research institutes have significantly raised their growth forecast for the current year. They now expect gross domestic product (GDP) to increase by 1.3 percent, according to their joint diagnosis published on Thursday. The recovery is expected to be stronger than forecast in the spring, when the institutes had projected growth of just 0.6 percent.
The German economy developed significantly more strongly in the first half of 2026 than the institutes had expected in the spring. Exports and value added in the manufacturing sector, in particular, increased “surprisingly strongly”. According to the institutes, the German economy benefited from robust global economic activity and the worldwide AI boom. At the same time, competitors from the Gulf region faced significant production disruptions as a result of the war in Iran.
Government consumption also increased sharply, according to the joint diagnosis. Business investment and private consumption, however, remained weak. The energy price shock associated with the war in Iran has slowed the German economy, but higher prices for fuel and heating oil have so far had little impact on other consumer prices.
Nevertheless, the economic research institutes stressed that the overall recovery remains weak. “The upswing stands on a narrow foundation, because high energy prices and structural problems are weighing on the economy,” explained Oliver Holtemöller of the Leibniz Institute for Economic Research Halle. In the current quarter, low water levels are also temporarily slowing economic activity.
For next year, the institutes expect GDP to grow by 1.1 percent. In 2028, they forecast an increase of just 0.4 percent. “In 2028, the expansion will lose momentum,” the researchers said.
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