The German economy has left behind two years of contraction. Although the growth recorded in 2025 is very slight, it is expected to continue its gradual recovery in stages. After falls in the Gross Domestic Product (GDP) of 0.9% in 2023 and 0.5% in 2024 and a slight increase of 0.2% in 2025, «we project growth of 0.7% for 2026 and a cyclical growth peak of 1.3% for 2027». These are Berenberg’s forecasts, which point out that, «after growth approximately in line with the long-term trend in 2026, we expect Germany to reach a cyclical growth peak in 2027. when the stimulus reaches full force and consumers and businesses react to the more positive environment spending more too.» After two years of recession, German economy slowly growing again in 2025 thanks mainly to higher final consumption spending by both households and the Government, while exports recorded another decline and investment remained weak. There was, as they point out, a «very uneven performance» and with «few surprises». «As expected, many details are not very encouraging. The traditional drivers of German growth, exports and business investment, continued to struggle last year. Real exports of goods and services fell for the third year in a row, while rising domestic consumption and the rush to build up inventories in uncertain times led to a rise in imports.» While there was increased public investment in defense and infrastructure, «weakness in residential construction and business investment led to an overall decline in investment. Weak business investment still reflects excessive bureaucracy, greater uncertainty about economic policy and high non-wage labor costs,» which he believes will «does not bode well for trend growth». «Fortunately, the Government is now trying to reduce bureaucracy more vigorously than in the past. Along with some other pro-growth reforms and extra money for infrastructure investment, trend growth may still increase in the coming years«, they say. In general, «the annual result and the first official estimate for the fourth quarter confirm our forecasts. Thanks to fiscal stimulus, some pro-growth reforms and continued adaptation to external challenges, we expect The German economy continues its gradual recovery in a phased manner«, indicate the entity’s analysts. Thus, looking to the future, they predict more growth: «A higher public spending will probably directly account for around 0.4 percentage points of the 0.7% increase in German GDP that we project for 2026. Added to this will be a rebound in residential construction due to low interest rates, the streamlining of approval procedures and the worsening housing shortage. A some increase in private consumption and business investment should also help more than offset the likely drag on net exportswhich could still subtract 0.4% from German GDP this year.» For its part, Oxford Economics highlights that private consumption registered «a solid expansion» and that public consumption «was the other main driver of growth, although budget data suggests that Spending has not yet reached the fiscal flexibility planned for last year«. Meanwhile, «the German export industry continued to struggle, as reflected by the deterioration of net trade. Investment contracted throughout the year, as private business investment was weighed down by tariff uncertainty and the uncertain trajectory of fiscal flexibility«. In their case, for this 2026 they continue to wait for a economic growth of 0.7%«since the slightly more positive data for the fourth quarter did not substantially modify the effect of fiscal easing in 2026,» and they foresee a slower implementation of fiscal easing than government plans suggest, «delayed by supply bottlenecks in the affected sectors.» «While we do not yet see signs of a self-sustained recovery, we expect momentum to strengthen as the fiscal impulse is transmitted to the broader economy, which will result in strong growth in late 2026 and 2027«, they conclude.
