By Maria Martinez BERLIN, Jan 28 (Reuters) - The German government lowered its growth forecasts for this and next year in Europe's biggest economy, reflecting greater uncertainty in international
Germany Lowers Economic Growth Projections Amid Trade Concerns
Germany's Economic Growth Forecasts
By Maria Martinez
Factors Influencing Growth
BERLIN, Jan 28 (Reuters) - Germany lowered its growth forecasts for this and next year in Europe's biggest economy, citing heightened uncertainty around global trade and the fact that economic and fiscal-policy measures have not taken effect as quickly as previously assumed.
Impact of Fiscal Policy
The government trimmed its growth forecast for 2026 to 1.0% from 1.3%, confirming a report by Reuters last week. GDP growth in 2027 is seen at 1.3%, down from 1.4% expected previously.
Export Market Challenges
"The background to this slightly more cautious assessment is the fact that the larger economic and fiscal-policy measures that had been expected have not materialized quite as quickly and not to the extent that we had assumed," German Economy Minister Katherina Reiche said on Wednesday in the presentation of the forecasts.
However, the new figures are still significantly higher than the 0.2% expansion recorded in 2025, which followed two consecutive years of contraction.
"The cyclical recovery is being supported by stronger domestic momentum, while external headwinds are easing somewhat," the economy ministry said in its annual economic report.
FISCAL STIMULUS TO DRIVE GROWTH
While the national parliament approved a landmark 500 billion euro ($600 billion) special fund for infrastructure in March, by the end of the year only 24 billion euros had been invested, reflecting the slow pace of decision-making in Germany's federal system.
In 2026, fiscal policy measures on their own are expected to contribute around two-thirds of a percentage point to GDP growth, according to the report.
Economists and business groups warn the fiscal package alone will not be enough to deliver sustainable growth and call for bolder structural reforms.
While public spending will drive growth, private consumption is expected to grow by only 0.8% in 2026 - down from 1.4% growth in 2025. The report assumed the savings rate was unchanged at around 10.5% of household income.
U.S. tariff increases from last year continue to weigh on the world economy and given weaker demand from previously important German export markets outside Europe, Germany is likely to lose global market share again, the report said.
Following three years of declines in exports, they are expected to grow 0.8%.
($1 = 0.8356 euros)
(Reporting by Maria Martinez;Editing by Madeline Chambers, Miranda Murray and Alison Williams)
