Exclusive-German government raises forecasts for 2026 and 2027, source says

German Government Upgrades Economic Growth Forecasts for 2026 and 2027

Revised Economic Outlook and Key Drivers

By Holger Hansen

BERLIN, Oct 1 (Reuters) - The German government has raised its economic forecasts, a person familiar with the draft told Reuters on Thursday, as the Iran war is not hurting the economy as much as feared.

Updated Growth Projections

The government has raised the forecast for economic growth to 1.3% in 2026 and 1.1% in 2027. It expected 0.5% growth for 2026 and 0.9% in 2027 in its April forecasts.

For 2028, the government expects growth of 0.6%.

Resilience Amid Global Uncertainty

Despite higher prices due to the Iran conflict and uncertainty caused by US tariffs, the German economy has shown resilience and grew by 0.3% in the second quarter.

Government Investments and Export Growth

The upturn is being driven primarily by the government's debt-financed investments in infrastructure and the strengthening of Germany's armed forces.

Exports will also be a growth driver. According to the source, the government forecasts export growth of 3.7% this year. Growth is then expected to slow to 2.1% in 2027 and 1.1% in 2028.

Domestic Consumption and Inflation Trends

Meanwhile, domestic consumption is expected to remain muted, with 0.8% growth forecast in 2026 and 1.1% in 2027, according to the source.

The war in the Middle East is affecting many consumers primarily through inflation, especially via sharply higher petrol and diesel prices.

According to the source, the government expects inflation to reach 2.7% in 2026 and 3.0% in 2027, before easing to 2.2% in 2028.

Expert Opinions and Official Announcement

Several economic institutes had upgraded their economic growth forecasts for 2026 and 2027 before the government, saying higher government spending drove a stronger-than-expected recovery in the first half of the year.

The government will officially present the new forecasts on October 8. The economy ministry was not immediately available to comment.

(Reporting by Holger Hansen; writing by Maria Martinez; editing by Philippa Fletcher)