IMF Raises Germany's 2026 Growth Forecast to 1.1% Amid Government Spending Boost

The International Monetary Fund (IMF) has updated its economic outlook for Germany in 2026, projecting a growth rate of 1.1 percent, an upward revision of 0.2 percentage points from its October forecast. This improved forecast is primarily attributed to increased public sector spending, which the IMF expects to provide a short-term stimulus to the German economy and help offset negative impacts from U.S. tariffs.

Germany’s growth projection notably outpaces other G7 economies, with Japan and Italy expected to grow at 0.7 percent and 1.0 percent respectively. The Eurozone overall is forecasted to expand by 1.3 percent this year. The IMF anticipates that growth will accelerate further in 2027, reaching 1.5 percent for Germany.

The German government holds a slightly more optimistic view, forecasting 1.3 percent growth based on stronger domestic demand driven by stable prices and rising household incomes. This suggests a positive economic momentum fueled by internal consumer spending.

Despite these promising signs, the IMF report underscores persistent global risks that could derail the recovery. It highlights potential pitfalls such as escalating trade conflicts and uncertainty surrounding investments in artificial intelligence technology, which may impact market stability and productivity.

Public sector investment is pinpointed as a crucial factor supporting Germany’s economic resilience, helping the country to better withstand external shocks compared to its G7 peers.

In summary, while Germany is expected to achieve solid growth in 2026 supported by government expenditure and domestic demand, cautious optimism prevails given the considerable external challenges laid out by the IMF.