Berlin:Germany has increased its economic growth forecast for 2026 to 1.3%, up from the previously estimated 0.5%, with exports and public spending driving the recovery despite Middle East tensions and rising energy costs.

According to Anadolu Agency, the autumn forecast was presented by Economy and Energy Minister Katherina Reiche, who also projected growth of 1.1% for 2027 and 0.6% for 2028. The German economy showed strong expansion in the first half of 2026, primarily due to exports and public consumption.

Foreign trade is anticipated to be the main growth driver this year, with exports bolstered in the second quarter as buyers increased inventories of energy-intensive goods from Germany amid global shortages. Fiscal measures, including special funds and defense spending, are expected to further support public investment and government consumption.

However, private demand is predicted to recover more slowly. Energy-driven price hikes are likely to keep household spending initially subdued, even as real wages continue to grow. Private investment is also expected to recover gradually, influenced by geopolitical uncertainties, low capacity utilization, higher material and financing costs, and structural challenges.

The ministry highlighted that the economic outlook remains heavily reliant on developments in the Middle East and Ukraine. A lasting resolution to these conflicts could enhance recovery efforts by reducing energy prices, while sustained high commodity and energy costs could exert additional pressure on businesses and consumers.