Germany's federal government has adjusted down its outlook for economic expansion in Europe’s largest economy, trimming its growth forecasts for 2026 and 2027 amid greater uncertainty in international trade.
The updated projection places gross domestic product (GDP) growth in 2026 at 1.0%, reduced from the 1.3% forecast the government had previously set. That 2026 projection remains well above the 0.2% increase recorded in 2025, which followed two consecutive years of contraction.
Looking further ahead, the government now expects GDP to expand by 1.3% in 2027, down from its earlier 1.4% estimate. The revisions appear in the economy ministry's annual economic report, published on Wednesday.
"The cyclical recovery is being supported by stronger domestic momentum, while external headwinds are easing somewhat,"
The report highlights the role of domestic demand in underpinning the cyclical recovery even as trade-related uncertainties weigh on the outlook. Alongside the growth revisions, the report details fiscal policy actions intended to bolster activity.
In March, the national parliament authorised a 500 billion euro special fund to finance infrastructure projects. However, implementation has been slow: by the end of the year only 24 billion euros of the package had been invested. The government points to the deliberate pace of decision-making within Germany's federal system as a factor in the limited disbursement.
According to the ministry's calculations, fiscal-policy measures on their own are expected to contribute roughly two-thirds of a percentage point to GDP growth in 2026. That support from fiscal stimulus is a central element of the revised near-term outlook.
Despite the expected boost from public spending, economists and business groups cited in the report caution that the fiscal package by itself will not deliver lasting, self-sustaining growth. They are calling for more ambitious structural reforms to complement the spending measures.
For reference, the report provides an exchange-rate conversion: $1 = 0.8356 euros.
Overall, the government portrays a picture of a recovering economy propped up by domestic activity and fiscal support, yet still vulnerable to external trade shocks and hampered by slow project implementation at the federal level.