Germany’s governing coalition has lowered its outlook for the country’s economic growth, citing a slower pickup than officials had expected as they work to stimulate investment and modernize key industries.
In a Wednesday statement, Economy Minister Katherina Reiche said the government now expects gross domestic product to expand by about 1% in 2026 and by 1.3% in 2027. Reiche said the chancellor’s coalition under Friedrich Merz trimmed the estimates from those released in October, when the government projected growth of 1.3% for 2026 and 1.4% for 2027.
The reduction follows recent data indicating that Germany’s economy is still finding its footing. According to preliminary official figures released two weeks earlier, Germany returned to modest growth of 0.2% last year after shrinking for two years in a row.
Reiche told reporters that the government’s “somewhat cautious estimate” reflects that the anticipated momentum from its financial and economic policy measures “wasn’t realized quite as quickly and to the extent that we assumed.” She said, however, that newer data points to a “clear recovery,” even with the revised forecasts.
The Merz government, which took office in May, has described revitalizing the economy as one of its priorities. The coalition launched a program to encourage investment and set up a 500 billion-euro ($596 billion) fund aimed at channeling money into Germany’s infrastructure over the next 12 years, according to the government’s plan described in the AP report.
Officials also say the government has taken steps that include making it easier for defense spending to rise, moving to subsidize energy prices for heavy industry, cutting red tape, and speeding up Germany’s lagging digitization. Those measures were designed to address structural weaknesses that have weighed on growth, especially in sectors tied to German exports.
Germany has long expanded exports and benefited from strong production in engineered products such as industrial machinery and luxury cars, but officials have pointed to worsening pressures. The AP report said Germany has faced increasing competition from Chinese companies, higher energy costs following Russia’s full-scale invasion of Ukraine, and other risks that have affected the outlook, including tariffs and trade threats associated with U.S. President Donald Trump.
In this forecast update, the government’s message was that the investment-and-infrastructure effort remains central, but the pace of improvement has been slower than expected so far. Reiche’s comments tied that slower timing to the gap between how quickly policy support was assumed to take effect and how it has actually played out, even as she pointed to improving data as the basis for optimism in the coming period.