Overview
- Leading research institutes, led by the Ifo Institute, sharply raised their 2026 GDP forecasts on Thursday, with Ifo at 1.4% and peers (IfW, RWI, DIW) clustering around 1.2–1.3%.
- The revisions reflect revised end-2025/early-2026 data, unexpectedly strong export demand and a large, partly debt-financed government spending package for infrastructure, climate and defence.
- Institutes flag clear trade-offs: they now expect inflation near 2.8–3.0% in 2026–2027 and project the financing deficit and gross debt to rise through 2028 as special spending continues.
- The rebound is uneven and fragile because private consumption and business investment remain weak, unemployment is not expected to fall in 2026, and risks from the Iran conflict, energy-price swings and low Rhine water persist.
- The institutes will present a joint autumn report later in September that will inform government budgeting and could shape fiscal decisions as the ECB watches higher inflation for monetary-policy choices.