by Maria Martinez
Berlin (Reuters) – The German economy is expected to reconnect with growth this year after two consecutive years of contraction, three German economic institutes, which revised their forecasts for 2025 and 2026 on Thursday.
The Kiel Institute for the Global Economy (IFW) noted its Grove Gross Product (GDP) growth forecast at 0.3% for this year against stagnation in its previous projection.
IFW explains that this revision is due to a first quarter better than expected, during which the economy increased by 0.4%.
“The German economy sees the light at the end of the tunnel,” write the economists of IFW in their new forecasts.
They are also more optimistic for 2026, with the increase in the GDP growth forecast at 1.6%, against a previous forecast of 1.5%.
The IFO Institute, for its part, said planned growth of 0.3% this year, against a forecast of 0.2% previously. For 2026, IFO saw growth of 1.5%, compared to 0.8% in the projections announced in the spring.
“The German economy crisis has reached its lowest point during the semester covering the winter period,” said Timo Wollmershäuser, director of forecasts at IFO.
“The budgetary measures announced by the new German government are one of the reasons for this renewed growth,” he added.
The Leibniz Institute for Economic Research (RWI), for its part, said Thursday anticipating German GDP growth of 0.3% this year and 1.5% in 2026.
Despite the short -term obstacles linked to uncertainty on customs duties, a gradual recovery is emerging for the second half, explained Torsten Schmidt, director of forecasts at Rwi.
“It is now important that the announcements of the federal government are followed by actions,” he said, referring to the vast recovery plan provided by Chancellor Friedrich Merz.
The German government last week approved a 46 billion euros tax reduction program to support businesses and stimulate the economy.
The German Parliament also approved in March a massive increase in expenses, with in particular the creation of an infrastructure fund of 500 billion euros.
In its economic forecasts, the IFO Institute estimates that these measures will generate a gain of 10 billion euros in 2025 and 57 billion euros in 2026.
Consequently, growth should be higher than 0.1 percentage points this year and 0.7 percentage points next year, compared to a hypothesis not taking into account the economic projects of the government.
(Report Maria Martinez and Rene Wagner, Claude Chendjou, edited by Sophie Louet)
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