BERLIN, June 12 (Xinhua) -- Germany is set to return to growth in 2026 after years of decline, according to the latest forecasts released by leading economic research institutes on Thursday. However, experts warn that U.S. trade policy continues to pose a significant risk.
The ifo Institute for Economic Research has revised its outlook upward for the coming year, projecting that Germany's gross domestic product (GDP) could grow by 1.5 percent, nearly double its earlier estimate of 0.8 percent. The institute also raised its forecast for 2025 slightly, from 0.2 to 0.3 percent.
At the Kiel Institute for the World Economy (IfW Kiel), economists expressed optimism, predicting that GDP will grow by 1.6 percent in 2026, up from 1.5 percent previously. Their forecast for the current year was also revised upward, from stagnation to modest growth of 0.3 percent.
Nevertheless, the Halle Institute for Economic Research (IWH) foresees a more gradual recovery, predicting GDP growth of 0.4 percent in 2025 after two years of contraction, and a further acceleration to 1.1 percent in 2026. "There are increasing signs of a recovery in the German economy," said Oliver Holtemoeller, head of the macroeconomics department and vice president at the IWH.
"Leading indicators support our view that, after two years of contraction, the industrial sector has reached the trough -- albeit at a low level," said Stefan Kooths, head of forecasting at the IfW Kiel.
The German economy shrank by 0.3 percent in 2023 and by 0.2 percent in 2024. "The crisis in the German economy reached its low point in the winter half-year. One reason for the growth spurt is the fiscal measures announced by the new German government," said Timo Wollmershaeuser, deputy director of the ifo center for macroeconomics and surveys and head of forecasts.
Ifo said that the stimulus, including higher public spending, tax cuts, and investment, will amount to 10 billion euros (11.58 billion U.S. dollars) this year and 57 billion euros in 2026.
However, these more optimistic projections are mainly based on the assumption that the ongoing trade conflict between the European Union and the United States will be resolved positively. Since the dispute remains unsettled, economists continue to view U.S. trade policy as a key source of uncertainty. "A considerable risk for the German economy lies in a possible escalation of the U.S. trade conflicts," Holtemoeller said.
According to the ifo Institute, the tariffs already imposed by the U.S. government under President Donald Trump would reduce German GDP growth by 0.1 percentage points this year and by 0.3 percentage points in 2026. A resolution could improve growth prospects, but any escalation might risk tipping Germany back into recession.
"Trade policy risks remain substantial," said IfW Kiel President Moritz Schularick. "The erratic tariff policy of the United States continues to fuel uncertainty for German foreign trade." (1 euro = 1.16 U.S. dollar) ■