According to an analysis by the Bundesbank, the German economy will only slowly gain momentum in 2026. “In the first quarter, the economy is likely to continue its recovery, albeit with weak momentum,” says the central bank’s February monthly report. “From spring onwards, the German economy is likely to grow more dynamically, driven primarily by fiscal stimulus.” Billions of dollars in investments in infrastructure and defense are expected to boost the economy.
Recently, demand for German industrial products has already increased. However, according to the Bundesbank’s assessment, a large part of the sharp increase in domestic orders is likely to be attributable to large orders in connection with additional defense spending, which are not directly reflected in production. “Due to its poor competitive position, German industry only benefits to a limited extent from growing world trade,” write the economists.
More demand from abroad
After all, more orders for products “Made in Germany” have recently been received from abroad. “Following the setbacks surrounding tariff increases, there are now signs of an upward trend in foreign demand,” says the monthly report. “Exports are therefore likely to increase.”
The Bundesbank expects little stimulus from construction and private consumption in the first three months of the current year. The snowy winter is slowing down construction activity; at consumer level, initial indicators indicate that “private consumption may not be able to maintain its elevated level.”
Tailwind for the economy at the end of 2025
In the final quarter of 2025, the German economy grew by 0.3 percent, the fastest rate in a quarter in three years. This is the result of the latest calculations by the Federal Statistical Office on the gross domestic product (GDP). The Wiesbaden authority will publish detailed results for the fourth quarter next Wednesday (February 25). In 2025 as a whole, Europe’s largest economy narrowly missed its third year without economic growth, with an increase of 0.2 percent.
