Germany economic growth forecast raised to 1.2 percent by IW

The German economy is growing more robustly than previously anticipated. The Institute of the German Economy (IW) has significantly increased its growth forecast for the current year from 0.4 percent to 1.2 percent. This upward revision is attributed to a surprisingly strong first half of the year and the availability of debt-financed funds dedicated to infrastructure modernization.

However, economists warn that economic momentum is expected to slow in the second half of 2026. Factors contributing to this potential slowdown include the end of special export effects, high energy prices impacting private consumption, and an ongoing crisis in the construction sector. While state investments are driving current growth, high levels of debt—including spending for Bundeswehr rearmament—are projected to lead to a state deficit of approximately 4 percent of economic output by 2026.

In a separate development regarding political perception, recent Deutschlandtrend data indicates a significant decline in public trust regarding the economic competence of the Union (CDU/CSU). While specific figures and methodologies were not detailed in the report, such shifts in perception can influence the expectations of consumers, companies, and investors.