Key facts
- Germany's economic growth forecast for 2027 has been cut to 1.0% by the Kiel Institute.
- The persistent energy price shock is identified as a key factor hindering economic recovery.
- Inflation is projected to increase to 2.8% in 2026 before falling to 2.3% in 2027.
- Expansive fiscal policy, particularly public consumption and investment, is expected to support the recovery.
- Weakened competitiveness and subdued business investment are holding back growth.
Germany's economic recovery is expected to be slower than anticipated, with the Kiel Institute for the World Economy revising down its 2027 growth forecast. The persistent impact of higher energy prices, linked to geopolitical events like the Iran war, is weighing on households, companies, and export performance.
The institute now projects real gross domestic product to grow by 0.8% in 2026 and 1.0% in 2027, a reduction from its earlier 1.4% forecast for 2027. This slowdown is attributed to elevated commodity prices, a decline in industrial competitiveness, and subdued business investment, despite supportive fiscal policies including public consumption and investment.
Inflation is forecast to rise to 2.8% in 2026 from 2.2% in 2025, before moderating to 2.3% in 2027. The higher oil and gas prices are diminishing purchasing power and contributing to sustained price pressures. Private consumption is expected to see modest growth of 0.3% this year and 0.4% next year, while exports are projected to increase by 1.8% in 2026 and 1.6% in 2027.
The labor market is anticipated to improve gradually, with unemployment rates forecast at 6.3% in 2026 and 6.2% in 2027.