Germany's IW institute triples growth forecast for 2026

Germany's economy is projected to grow by nearly 1.2% in 2026, according to new forecasts from the German Economic Institute (IW), Reuters reported on Sunday. The initial growth estimate of 0.4% was significantly revised upward. Other prominent economy institutes, such as Ifo, DIW, RWI and IMK, have also increased their growth projections following the strong performance in the first half of the year.

However, the IW warns that this momentum may wane in the second half of the year due to high energy prices, weak private investment, and job losses, which are expected to dampen demand. For 2027, the economic institute predicts slower growth of nearly 1%, primarily driven by a balanced contribution from consumption and investment.

Real exports are forecast to rise by 2.8% this year, while imports are predicted to increase by 2%. This surge in exports is attributed to the sharp rise in goods exports in the second quarter, partly due to inventory effects. Despite this, IW cautions that the export boost is likely temporary, with structural pressures such as high production costs, protectionism, and Chinese competition persisting.

The private consumption is expected to increase by only 0.3% in 2026, as inflation exceeding 2.5% reduces purchasing power.