The German economy is undergoing a crucial period of transformation after a long period of stagnation. Economic circles are looking forward to potential recovery opportunities in the coming year, in light of a changing global environment that combines local factors and external challenges, creating a complex equation for the future growth path.
Economic analyzes focus on the ability of the German government and the private sector to stimulate the economy through various fiscal and investment policies, amid increasing competitive pressures from advanced Asian markets technologically and financially. Expectations vary about the strength of the recovery, between those who see a possible recovery and those who warn of its limitations.
Experts also emphasize the importance of government policies in determining the course of the economy in the medium term, especially with regard to investments, infrastructure and structural reforms.
Deutsche Bank’s global forecast for 2026 points to a “turning point” for the German economy. Robin Winkler, senior German economist in the bank’s research department, says:
“After years of stagnation, recovery is imminent by 2026.”
“Although the German economy may have overcome the recession this year, the real recovery is expected to begin next year.”
“We expect a significant economic recovery and GDP growth of 1.5 percent in 2026.”
“At the same time, the labor market is likely to see at least stability.”
According to the bank, the strongest growth incentives will come from a significant increase in government spending, while consumers and private sector investors are likely to provide slight incentives for growth at this time.
Winkler says: “However, the large investment by companies in intellectual property is an encouraging development, as it increasingly compensates for weak investment in equipment.”
In addition to stimulating new government demand in civil engineering, Winkler expects an initial and cautious recovery in the residential construction sector. However, foreign trade will continue to slow growth due to continued weak competitiveness.
In this context, the economic policy of the German government plays a pivotal role. Winkler says: “Interest rate cuts by the European Central Bank have been completed, and monetary policy will not provide further expansionary incentives. The special fund for infrastructure and climate neutrality must be used in a targeted manner to achieve long-term growth effects.” He adds that the government must also address delayed structural reforms, such as reducing bureaucracy.
Formal recovery
From Berlin, writer and analyst Abdel Messih Al-Shami tells “Sky News Arabia” website:
“There is a clear discrepancy in the expectations of institutes and research centers regarding the performance of the German economy during the next year.”
“Some parties expect growth ranging between 1 and 1.5 percent, while other institutes believe that growth may not exceed 0.2 percent, which practically means the absence of real economic growth.”
“The spending plan adopted by the current German government may lead to a limited recovery in the economic cycle, by moving the wheel of liquidity and increasing job opportunities.”
“This recovery is likely to be “formal” resulting from financial injection, and not from a fundamental improvement in the fundamentals of the economy.”
He adds: This spending will in return entail significant burdens on the government, which may limit its ability to continue supporting growth in the medium term, especially in light of global tensions, high energy prices, the costs of wars, and increased prices of raw materials.
Al-Shami points out that the German economy faces fierce competition from Asia, especially from countries that possess huge financial and technological capabilities, stressing that competition is no longer limited to China alone, but includes a large number of Asian economies that are technologically and financially advanced, even in the fields of technology and scientific research.
He points out that Asian markets enjoy greater financial flexibility, lower production costs, and large local markets that support the circulation of the economy, in addition to a tangible improvement in purchasing power, which enhances their global competitiveness.
Al-Shami concludes his speech by saying: “These factors combined will limit the ability of the German economy to achieve real growth in the next stage,” predicting that economic performance will remain within the framework of a “formal recovery” dependent on the government’s ability to manage crises and keep pace with escalating global competition.
Limited expectations
The forecasts of the “economic sages” in Germany indicate that the national economy will not witness a widespread recovery even next year.
The Council slightly reduced its forecast for 2026, as it now expects Germany’s GDP to grow by only 0.9 percent, after the Council’s estimates in the spring indicated that this percentage would reach 1 percent. The German government expects relatively stronger growth of 1.3 percent next year.
The “Economic Sages” Council is an advisory body to the German Cabinet, comprising five senior experts in the field of economics, and its official name is the “Council of Experts for Assessing Overall Economic Development.”
