German government raises growth forecasts for 2026 and 2027

Berlin, October 8 - The German government has lifted its economic growth predictions for the current year and next year, as the Iran conflict has not impacted the economy as previously anticipated, according to the Ministry of Economy. The government has adjusted the projected economic growth to 1.3% for 2026 and 1.1% for 2027, aligning with a Reuters report published on October 1. In April, the government had anticipated a growth rate of 0.5% for 2026 and 0.9% for 2027.

These revised forecasts match those of Germany's top economic research organizations. For 2028, the government projects a growth rate of 0.6%. The prospect of this economic uplift is a welcome development for Chancellor Friedrich Merz, as Germany's sluggish economy was a significant issue during the regional elections in September, where far-right and far-left parties made substantial gains.

The resurgence is mainly fueled by the government's debt-backed investments in infrastructure and the enhancement of Germany's military capabilities. Exports are also expected to contribute to economic growth, with the government projecting a 3.7% increase in exports this year. However, growth is expected to decelerate to 2.1% in 2027 and 1.1% in 2028.

The Middle East war is affecting consumers mainly through inflation, with the government predicting inflation rates of 2.7% in 2026 and 3.0% in 2027, followed by a decline to 2.2% in 2028.