German economic institute raises 2026 growth forecast more than twofold

Germany's Institute for Macroeconomic and Business Cycle Research (IMK) has more than doubled its economic growth forecast for 2026, signalling growing confidence in the nation's economic trajectory following recent difficulties.

The upward revision reflects expectations of improved conditions in Europe's largest economy. However, the institute warned that the anticipated recovery is not yet self-sustaining, with structural headwinds continuing to constrain household spending and broader economic momentum.

Elevated energy prices remain a significant drag on consumer confidence and disposable income across German households. The cost pressures have been exacerbated by ongoing policy uncertainty, which is dampening business investment and consumer spending patterns.

The mixed outlook underscores the delicate state of Germany's economic recovery. While growth prospects have brightened considerably compared with earlier projections, policymakers face continued challenges in addressing cost-of-living pressures that threaten to undermine domestic demand during the crucial recovery period.

Analysts emphasise that sustained improvements in the economic environment will depend on moderating energy costs and clearer policy frameworks that encourage both household consumption and corporate investment.