KfW Research Lifts German Growth Forecast for 2026

KfW Research, the analysis unit of the German development bank KfW, has substantially increased its forecast for Germany's economic growth in 2026. The revised outlook projects a real gross domestic product (GDP) growth of 1.5 percent, an upward adjustment of 0.5 percentage points from previous estimates. This revision reflects expectations that government stimulus measures will bolster the economy.

The forecast for the current year, 2025, has also seen an upward revision. KfW Research now anticipates Germany's economy to grow by 0.2 percent in 2025, compared to the prior forecast of 0.0 percent. Chief Economist Dr. Dirk Schumacher indicated that economic momentum is expected to gradually intensify towards the end of the year, with the federal government's investment initiative projected to provide an initial boost in the fourth quarter. Signs of increasing credit demand from businesses and households, along with rising private investment activity, support this outlook.

Growth forecasts for the Eurozone have also been raised for 2025 to 1.2 percent, a 0.4 percentage point increase. For 2026, Eurozone growth is projected at 1.1 percent. Inflation forecasts are maintained at 2.1 percent for Germany in 2025 and 2.0 percent in 2026. For the Eurozone, inflation is expected to be 2.0 percent in 2025 and 1.9 percent in 2026.

Potential risks to the forecast include ongoing uncertainties related to U.S. trade policy and the implementation and impact of Germany's investment package. KfW Research continues to monitor economic developments and provides regular updates.