Joint Economic Forecast for the German Economy #1-2026: Energy Price Shock Overshadows Fiscal Stimulus – Growth Momentum is Fading

Following several years of decline, a recovery began to take hold over the course of last year. Whilst the export-oriented sector struggled to gain a foothold amid a further decline in competitiveness, high geopolitical uncertainty and ongoing trade policy headwinds, the recovery was largely driven by the domestic economy. The energy price shock triggered by the war in Iran is dampening the recovery, but is unlikely to bring it to a complete standstill. This is ensured by the significantly expansionary fiscal policy, which primarily supports companies in the defence industry and civil engineering. In most of the manufacturing sector, however, the situation remains subdued. Gross domestic product is expected to grow by 0.6 percent this year and by 0.9 percent in 2027, after economic output barely rose last year, with an increase of 0.2 percent. Compared with the Autumn Report 2025, the institutes have thus revised their forecast downwards significantly by 0.6 percentage points for the current year and by 0.4 percentage points for the coming year.