Germany: Cautious growth outlook – ABN AMRO
ABN AMRO’s Chief Economist Germany, Alexander Krüger, notes that German economic output is rising and the bank has raised its Gross Domestic Product (GDP) growth forecast for 2026 to 1.3% and for 2027 to 1.1%.
Germany's chief economist at ABN AMRO, Alexander Krüger, has raised the country's GDP growth forecasts for 2026 and 2027 to 1.3% and 1.1%, respectively. The bank anticipates inflation to gradually return to the European Central Bank's 2.0% target by spring 2027, although risks are currently tilted towards the upside. Despite economic output growth, a significant breakthrough is yet to occur.
Nonetheless, ABN AMRO's cautious optimism is bolstered by the German economy's resilience despite the ongoing Iran war, with three consecutive quarters of solid GDP growth. The cumulative growth gap with other Euro Area countries since the end of the Covid pandemic remains substantial, primarily driven by debt-financed government consumption.
Nevertheless, public investment, including defense expenditure, is expected to rise, supporting growth. However, the impact on other demand components is anticipated to be limited due to the impact of elevated energy prices and an uncertain labor market outlook. Factoring in statistical revisions, the GDP growth forecasts for 2026 and 2027 have been adjusted upward to 1.3% and 1.1%, respectively.
The bank remains vigilant for potential disruptions from US tariff policy and supply-chain developments. Moreover, ABN AMRO anticipates companies will pass most of the higher costs to consumers, leading to inflation remaining just below 3.0% this year. They expect inflation to gradually approach the 2.0% ECB target by spring 2027, with risks to the outlook remaining on the upside.
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