Germany’s economy is projected to experience a modest recovery in 2026, according to the country’s savings banks association, DSGV. The association forecasts a 1% growth in gross domestic product (GDP) after three years of stagnation. DSGV President Ulrich Reuter characterised the expected upswing as a positive sign, but cautioned that the recovery remains fragile, and is too dependant on state spending.
Reuter pointed out that a considerable portion of the anticipated growth would be fuelled by temporary state expenditure, which does not address underlying structural weaknesses within the German economy. Timo Plaga, chief economist at Sparkasse Hannover, noted the early impact of a public financing package aimed at infrastructure and climate initiatives, as well as increased defence spending.
Plaga estimated that these measures could contribute approximately 0.4 percentage points to this year’s anticipated growth, with a potential increase to around 0.5 percentage points the following year. Reuter identified 2026 as a possible turning point amidst escalating global tensions, urging Germany to actively seek new partnerships to bolster its economic resilience.
Reuter specifically highlighted the Mercosur trade deal as a crucial step towards establishing a free-trade area encompassing over 700 million people. He emphasised that failure to secure such agreements would represent a significant setback and voiced his support for provisional application of the Mercosur deal, to reinforce Germany’s trade position in a turbulent global economic landscape.
