The German Development Bank (KfW) projects a limited economic rebound for Germany in 2026, forecasting a 1.5 percent growth in Gross Domestic Product (GDP). This follows two years of economic stagnation experienced between 2023 and 2024.
According to a report released by KfW’s research division on Wednesday, the anticipated upswing in 2026 will be primarily fueled by an expansionary fiscal package adopted by the German government to stimulate domestic demand. This package includes increased government investments and expanded financial transfer programs.
The bank suggests that this financial stimulus will gradually invigorate the economy. However, the momentum will be constrained by several pressures. These include protectionist trade policies in the United States, which have negatively impacted German industrial sector exports, and the erosion of the German economy’s competitiveness in recent years due to escalating production and energy costs.
The report further emphasizes that the German economy continues to grapple with the consequences of investment bottlenecks, weak productivity, and sluggish global demand. KfW asserts that restoring medium-term growth levels requires deeper structural reforms in the energy, tax, and labor market sectors, alongside more significant measures to enhance the competitiveness of German companies in international markets.
KfW is a prominent financial institution in Germany and the European Union. It regularly publishes economic analyses that serve as a reference point for policymakers and the financial sector.
Other German institutions, such as the German Economic Institute and the German Institute for Economic Research, indicate that the nation’s economy is still in a fragile recovery phase following the global energy crisis and rising production costs, compounded by the effects of geopolitical tensions on global trade.
The modest growth forecast underscores the challenges facing the German economy as it navigates a complex global landscape.
