The German savings banks association DSGV expects the country's economy to record 1% growth in 2026 following three consecutive years of little or no expansion, the group said in a forecast released Monday.
Fragile upswing
DSGV President Ulrich Reuter described the projected uptick as a "moderate upswing," but he warned that the improvement is fragile. Reuter stressed that a considerable share of the anticipated growth will stem from temporary government expenditure rather than from measures that resolve underlying structural challenges.
Sources of near-term support
Timo Plaga, chief economist at Sparkasse Hannover, said the initial effects of public finance for infrastructure projects, climate-related initiatives and higher defence spending are already visible. Plaga estimated that these combined measures could add about 0.4 percentage points to this year’s expected growth and could rise to around 0.5 percentage points in 2027.
Those figures reflect the direct contribution Plaga attributes to targeted public spending, rather than broader private-sector-led expansion.
Trade partnerships and geopolitical context
Reuter framed 2026 as a potential inflection point amid growing global tensions and underscored the need for Germany to build new international partnerships. He singled out the Mercosur trade agreement as a key opportunity to establish a wider free-trade area that would cover more than 700 million people.
Reuter warned that failing to clinch the Mercosur deal would represent a "bitter blow" and voiced support for its provisional application as a step forward.
Outlook
While the DSGV forecast points to a modest recovery next year, the association's leaders and cited economists emphasise the tentative character of the rebound, noting its heavy reliance on government-financed programmes and external trade negotiations.