The ifo Institute has raised its forecast for German economic growth in 2026 to 1.4%, a 0.6 percentage-point upgrade from its summer projection. For 2027, it now expects 1.2% growth, followed by 0.8% in 2028.
The revision is notable because the outlook still includes a difficult energy environment. Ifo argues that stronger impulses from abroad and additional German spending on infrastructure, climate and defence are preventing the energy-price shock from producing a deeper slowdown.
Fiscal support is becoming part of the industrial story
Infrastructure and defence spending can support domestic order books even when consumer activity is weaker. That is particularly relevant to construction, transport equipment, engineering and suppliers exposed to public investment programmes.
The effect will depend on execution. Budget authorisation does not automatically become company revenue, and large infrastructure programmes can be delayed by planning, procurement and capacity constraints.
Ifo sees brighter industrial signals, not a return to old growth
The institute describes signs of improvement for Germany's crisis-hit industry, but its medium-term numbers remain modest. Growth of 1.2% in 2027 and 0.8% in 2028 would still leave Germany facing familiar questions about productivity, demographics and investment.
Inflation is also forecast to remain elevated enough to complicate the household recovery. Ifo expects headline inflation of 2.8% in 2026 and 3.0% in 2027 before easing in 2028.
The forecast is a scenario, not an outcome
The upgrade partly reflects revised historical data and a reassessment of current momentum. That is important because forecast changes do not always come from a new policy event; sometimes the statistical starting point itself changes.
German Business Review will treat the 1.4% figure as Ifo's current forecast rather than reported growth. The next national-account releases, industrial data and public-investment execution will determine whether the recovery path is being realised.