Berlin: The German central bank, Bundesbank, announced its expectation of a gradual economic recovery in Germany next year, primarily fueled by increased public investment, rising wages, and growing exports. This announcement comes after several years of economic contraction.

According to Anadolu Agency, the Bundesbank has adjusted its gross domestic product (GDP) growth forecast for the next year, lowering it from 0.7% to 0.6%. Looking further ahead, the bank anticipates growth rates of 1.3% for 2027 and 1.1% for 2028. The bank's six-month economic forecast report highlights that the expected recovery will be supported by investments and improvements in various economic sectors.

The report indicates that there are preliminary signs of an increase in government orders, although the impact of expansionary spending on economic growth will become more pronounced later in the upcoming year. The government's expenditures on infrastructure and defense are expected to increase significantly, with exports also projected to rise over the course of the next year.

Additionally, the bank noted that private residential construction investment is set to recover, with rising wages and improvements in the labor market contributing to real income growth and consumption. Businesses are expected to increase investment alongside improved capacity utilization.

Bundesbank President Joachim Nagel expressed optimism, noting that growth will begin to accelerate notably in 2027. He stated that while the initial progress in 2026 will be moderate, economic growth will gain momentum, largely driven by government spending and a resurgence in exports starting in the second quarter of 2026.

On the inflation front, the bank projected a slower decline than previously estimated. This is attributed to strong wage growth in robust service sectors and smaller decreases in energy prices. The Bundesbank has revised its inflation expectations upwards from its June forecast, predicting EU-harmonized inflation to fall to 2.2% next year, compared to the earlier estimate of 1.5% for 2026. The inflation expectation for this year has been adjusted from 2.2% to 2.3%, with a 2.1% projection for 2027. Current data indicates Germany's annual inflation remained at 2.3% in November, consistent with the previous month.