Economy Prognosis: Experts Project Sluggish Recovery Pessimistically Set for 2026 - Anticipated Economic Recovery in 2026, According to Researchers from IW
The German economy is currently grappling with the unpredictable U.S. trade policy, causing a ripple effect that has led many households to save due to fears of job losses. According to IW's chief economist, Michael Grömling, private consumption will only increase by about one percent in 2025.
The global economic situation and backlog of reforms in Germany have slowed down investments, with equipment investments declining by 2.5 percent this year. Notably, investments in equipment are crucial for determining potential growth in the coming decades. Grömling has emphasized the need for the German government to initiate comprehensive reforms in the autumn to set the right course for economic recovery from 2021 onward.
Grömling urged the black-red coalition in Berlin for reforms, particularly focusing on overcoming the investment crisis through enhanced public investment in infrastructure, decarbonization, education, and transformation sectors. He also stressed the importance of targeted investment incentives and a noticeable bureaucratic relief. An urgent corporate tax reform is also needed, according to Grömling.
The construction sector will not recover this year, and the IW predicts a decrease in exports by around 0.5 percent in 2025 and a slight recovery in 2026. However, the recent EU-U.S. trade deal, while significant, is expected to have a limited impact on the German economy.
The location of the Institute of the German Economy (IW) is in Cologne, where Grömling and his team continue to monitor the economic landscape closely. Despite the challenges, Grömling remains optimistic that if the necessary reforms are implemented, the German economy could see an improvement next year.
In conclusion, the German economy is facing a series of challenges, but with the right reforms and investments, there is hope for a sustainable upward trend in the coming years.
Read also:
- Railway line in Bavaria threatened by unstable slope - extensive construction site at risk
- Wind Farm Controversy on the Boundary of Laois and Kilkenny
- Delaware's contentious offshore wind project faces uncertainty as the Trump administration reverses course on clean energy initiatives.
- Massachusetts' sports betting income surged by 34% year-on-year in April
