DIW expects clear economic upswing from 2026

The German Institute for Economic Research (DIW) sees the stimulus light at the end of the tunnel. This year the German economy is likely to grow by 0.2 percent, but then it will be significantly upwards. For example, the DIW predicts growth of 1.7 percent for 2026 and for 2027 of 1.8 percent, as the institute in Berlin reports. “After the zigzag course in the first half of the year, the German economy finds on track and picks up more and more speed,” said the economists.

With its forecast, the DIW lends itself to a leading economic research institute such as the IFO and the Essen RWI, which also expects hardly any growth for 2025. The DIW is significantly more confident about the outlook for the coming years.

The billions of packages for infrastructure, climate protection and defense as well as incentives for private investments proved as a driver. “The Federal Government set the course for the upswing,” said DIW economist Geraldine Dany-Kmedlik. Expansive financial policy only hides structural problems, such as in industry.

Consumers’ consumption also supports the economy, although the buying mood was worried about a job loss. Growing real wages and the fallen inflation look positive. The export, on the other hand, is slowed down by the customs dispute with the USA.

DIW President Marcel Fratzscher pleads to strengthen private investments and the innovative ability of companies, for example by investing in digitization and AI. In addition, politics must reform the tax and social system and lower expenditure- even if there is “hardly any savings potential” in the civil allowance or refugees. For this, the federal government should reduce billions of climate -damaging subsidies. Fratzscher also advocates to abolish tax privileges, for example in large inheritances or real estate gains, and large fortune to tax more.