Published by Global Banking & Finance Review®
Posted on March 13, 2025
2 min readLast updated: January 24, 2026
IfW raises Germany's 2026 growth forecast to 1.5%, driven by expected public spending increases led by Friedrich Merz.
FRANKFURT (Reuters) - Germany's IfW economic institute raised its 2026 growth estimate for Europe's largest economy on Thursday, anticipating tailwinds from a public spending boost that conservative election winner Friedrich Merz is pushing for.
IfW, one of Germany's main economic forecasters, said next year's gross domestic product would likely increase by 1.5%, up from IfW's December forecast of 0.9%.
It also confirmed its previous projection for Germany's economy to stagnate in 2025, saying its structural problems would not let up in the short term amid international competition and the threat of tariffs.
In a bid to boost defence and infrastructure investments, the nation's likely next chancellor Merz of the conservative CDU/CSU party bloc is in a race against time to secure support from other parties for a massive increase in state borrowing.
He has initial backing from the Social Democrats (SPD) but needs to persuade other lawmakers in the outgoing parliament.
"In our projection for next year, we are factoring in that plans agreed in explorative talks between the conservatives and the SPD will already be partially implemented and that fiscal policy will take a significantly more expansive direction," IfW said.
(Reporting by Ludwig Burger and Rachel More, Editing by Friederike Heine)
The article discusses IfW's raised growth forecast for Germany in 2026 due to anticipated public spending increases.
Friedrich Merz is the conservative CDU/CSU party bloc leader pushing for a public spending boost in Germany.
Germany faces structural economic problems and international competition, including tariff threats.
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