German Ifo Raises Growth Forecast on Fiscal Spending and Export Improvement
Macro
Germany's Ifo Institute for Economic Research on Wednesday raised its forecast for German growth, saying that increased fiscal spending and improvements in manufacturing orders and export demand will outweigh the negative effects of higher energy prices. It now expects gross domestic product (GDP) to grow by 1.4% in 2026 and 1.2% in 2027, up from the 0.8% forecast in the summer. Growth is expected to slow to 0.8% in 2028. Ifo cited stronger-than-expected statistics at the start of 2026 and revisions to official data, noting that second-quarter GDP rose 0.3% quarter-on-quarter. Government spending on infrastructure, climate neutrality, and defense is expected to provide a fiscal stimulus of around 40 billion euros ($46.36 billion) in 2026, equivalent to 0.8% of GDP. Meanwhile, higher energy prices due to the Middle East conflict are expected to keep consumer spending weak, with inflation forecast at 2.8% in 2026, 3.0% in 2027, and 2.3% in 2028.
