Five German economic institutes raised growth forecasts to 1.3% in 2026, from 0.6%, and 1.1% in 2027, from 0.9%, after stronger-than-expected first-half performance. They said the recovery remains modest, with high energy prices and structural problems weighing on activity.
The institutes project growth slowing to 0.4% in 2028, citing a shrinking labour force due to demographic change and declining potential growth. They forecast inflation at 2.8% in 2026 and 3.2% in 2027, easing to 2.0% in 2028.
The institutes said the recovery slowed temporarily in the third quarter: sentiment indicators improved, but recent economic data weakened. They said the energy price shock associated with the Iran war weighed on activity, though higher motor-fuel and heating-oil prices had so far had little spillover into broader consumer prices. Employment is expected to decline further for now; unemployment is forecast to fall from 6.4% in 2026 to 6.2% in 2027 and 5.8% in 2028.
