Germany’s IMK institute more than doubles economic growth forecast for 2026
The recovery is not yet self-sustaining, with high energy prices and policy uncertainty weighing on household spending.
Germany's IMK economic institute has more than doubled its growth forecast for 2026, projecting a 1.3% increase in gross domestic product. This significant revision comes as exports in the first half of the year exceeded expectations, coupled with higher government spending on defense and infrastructure. The institute now anticipates a growth rate of 1.4% for 2027, up from its earlier estimate of 0.9%.
Similar growth adjustments have been made by other economic institutes, including Ifo, DIW, and RWI, following a more robust first half of the year. IMK's Sebastian Dullien noted that Germany's business environment remains resilient, despite recent dire predictions. However, the recovery process is not yet self-sustaining due to high energy prices and economic policy uncertainty, which are dampening household consumption.
Private consumption is only expected to contribute 0.1 percentage point to GDP growth this year, while government spending, including increased defense and ammunition expenditures, will add 0.7 points.
IMK forecasts an inflation rate of 2.7% for 2026 and 2.9% for 2027. The unemployment rate is projected to remain steady at 6.4% for both years.
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