Ifo institute raises German growth forecasts due to new government plans

By Maria Martinez

BERLIN (Reuters) -The Ifo institute on Thursday raised its forecasts for the German economy for this year and next, expecting new government measures and a spending surge to boost the anaemic economy.

The economic institute said it expects 0.3% growth this year, up from the 0.2% previously forecast. For 2026, Ifo foresees 1.5% growth, up from the 0.8% expected in its spring forecasts.

"The crisis in the German economy reached its low point in the winter half-year," said Timo Wollmershaeuser, head of forecasts at Ifo. "One reason for the growth spurt is the fiscal measures announced by the new German government."

The German cabinet approved a 46-billion-euro ($52.94 billion) tax relief package last week to support companies and revive its sluggish economy from this year through 2029.

Germany's parliament also approved plans for a massive spending surge in March, including a 500-billion-euro infrastructure fund and largely removing defence investment from the rules that cap borrowing.

In its economic forecast, the Ifo institute estimates a boost of 10 billion euros in 2025 and 57 billion euros in 2026 from these measures.

As a result, growth is likely to be 0.1 percentage points higher this year and 0.7 percentage points higher next year, compared with a scenario without the government economic plans.

(Reporting by Maria Martinez, Editing by Rachel More)