The Leibniz Institute for Economic Research Halle (IWH) expects the German economy to pick up slightly next year. At the end of the year it was still unclear whether the German economy was on the road to recovery, the IWH said. However, a slight recovery can be expected due to financial policy stimulus and increased real incomes.
In its economic forecast, the IWH assumes gross domestic product growth of one percent. The Munich Ifo Institute is more pessimistic; it lowered its forecast for 2026 by half a percentage point to 0.8 percent. The IWH is predicting growth of 0.2 percent for the current year, after the economy shrank by 0.5 percent last year.
“What is likely to stimulate the German economy above all is the additional public spending on infrastructure and defense,” said the Vice President of the IWH, Oliver Holtemöller. In addition, the economic recovery is also supported by a slight increase in exports. The international economy appears to remain robust at the end of 2025. In view of American customs policy, the strength of world trade is particularly noteworthy.
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For eastern Germany, the IWH expects slightly lower growth of 0.8 percent in 2026 for demographic reasons.