BERLIN, Jan. 28 — Germany’s federal government on Wednesday lowered its forecast for economic growth in 2026 to 1 percent, down 0.3 percentage points from its previous autumn projection, while stressing the need for investment and reforms to revive the economy.
Presenting the government’s annual economic report, Economy and Energy Minister Katherina Reiche said the downgrade reflected a weaker-than-expected recovery in the second half of 2025, which continued to weigh on the outlook entering the new year.
Also, large-scale fiscal spending on infrastructure and defense, rolled out last year, has so far delivered less economic stimulus than policymakers had hoped.
“The economy is slowly picking up speed again,” the report said. After several years of contraction or stagnation, the expected growth in 2026 sends a positive signal, but does not yet amount to a decisive turning point, it added, as the expansion is set to rely mainly on higher public spending, including government investment in infrastructure, alongside tax relief and lower energy costs for businesses.
According to the report, inflation-adjusted public spending is forecast to rise by 2.4 percent in 2026, while fixed capital investment is expected to grow by 3 percent, pointing to an investment-led recovery.
By contrast, exports could increase by just 0.8 percent for the year, leaving foreign trade unlikely to provide a meaningful boost to growth, the report said.
Export-oriented sectors remain under pressure amid geopolitical tensions and persistent trade policy uncertainty, it added. U.S. tariffs introduced in early 2025 have already weighed on German exports, while economists expect their full impact to become more visible in 2026.
Data from the Federal Statistical Office showed that Germany’s exports to the United States fell 9.4 percent year-on-year in the first 11 months of 2025, with shipments of cars, car parts and machinery among the hardest hit.
To strengthen competitiveness and economic resilience, the federal government reiterated the need for structural reforms in its annual economic report, the flagship policy document setting out Berlin’s economic strategy for the year ahead.
Outlining six priority areas on the supply side, the report highlighted reform plans to cut red tape, modernize infrastructure, foster innovation, reduce energy costs, strengthen external economic resilience and expand labor supply through reforms to the social security system. (Namibia Daily News / Xinhua)
