German economy faces tepid growth in 2026 due to global trade slowdown, says IW institute

By Rene Wagner and Maria Martinez

BERLIN, Dec 5 (Reuters) - Germany's economic recovery will remain subdued next year as exports struggle and global trade slows, according to a forecast by the German Economic Institute IW seen by Reuters on Friday.

The IW forecasts Germany's real gross domestic product to grow only slightly this year, by 0.1%, before hitting 0.9% next year, marking a notable increase after two years of contraction.

However, about a third of this growth will be due to a calendar effect, with nearly two-and-a-half more working days available than in 2025, according to the IW.

Germany's economy ministry in October revised up its 2025 forecast to 0.2% growth and it expects 1.3% growth in 2026.

The negative impact of U.S. tariff policies and ongoing geopolitical tensions are increasingly evident worldwide: After a 4.5 % increase in 2025, world trade is expected to grow by only 1.5% in 2026.

Foreign trade stress continues to weigh on private sector investment in Germany, while government investment plans are not expected to materialise significantly next year, said the IW.

Nevertheless, private and public investment together are forecast to contribute half a percentage point to growth in 2026.

Consumer spending is expected to remain below potential, despite inflation stabilising at around 2%, as employment prospects remain muted, IW said. (Reporting by Rene Wagner and Maria Martinez Editing by Miranda Murray)