Bundesbank's Optimistic Expectations: The German Economy Will Revive in 2027

Promising Developments in the German Economy

The German Central Bank (Bundesbank) has made optimistic predictions about the country’s economic future. According to the bank's latest report, Germany's economy is expected to slowly recover next year, gaining momentum with the increase in public spending by 2027.

Forecasts for GDP Growth

According to Bundesbank’s new estimates, gross domestic product is expected to grow by 0.6 percent in 2026 and 1.3 percent in 2027. In 2028, this rate is projected to be 1.1 percent.

Growth Expectations from Government Spending and Exports

Bundesbank President Joachim Nagel stated, "Economic growth will begin to rise significantly from the second quarter of 2026, particularly due to a revival in government spending and exports."

Increase in Bond Yields

Germany's 10-year bond yield rose by 3 basis points to 2.88 percent following the forecasts. The 30-year bond yield reached 3.53 percent, the highest level since 2011.

Economic Challenges and Expectations

Germany has entered a prolonged period of recession due to continuous declines in gross domestic product over the past two years. The country is vulnerable to factors such as high U.S. trade tariffs and increasing competition from China, and it also has to deal with structural issues such as unstructured bureaucracy and a lack of skilled labor.

Escape from Recession and Inflation Expectations

The economy is expected to shrink in the April-June period this year, but it is projected to escape recession with a growth expectation of 0.1 percent by the end of the year. The growth rate for 2026 is forecasted to be 0.9 percent and 1.4 percent for 2027, although these predictions are deemed more cautious compared to the government’s forecasts in October.

Regarding inflation, economists believe that "persistent high wage increases" will cause price rises to decline more slowly than expected. Additionally, the potential for upward risks in the inflation outlook is also noted.