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 forecasts regarding the country's economic future. According to the bank's latest report, Germany's economy is expected to gradually recover next year, gaining momentum by 2027 due to an increase in public spending.

GDP Growth Predictions

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

Growth Expectations with Government Spending and Exports

Bundesbank President Joachim Nagel stated, "From the second quarter of 2026 onwards, economic growth will significantly increase, particularly with a revival in government spending and exports."

Increase in Bond Yields

Germany’s 10-year bond yields rose by 3 basis points to 2.88% following these predictions. Meanwhile, the 30-year bond yield reached 3.53%, the highest level since 2011.

Economic Challenges and Expectations

Germany has entered a prolonged period of stagnation due to the continuous decline in gross domestic product over the past two years. The country remains 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 shortage of qualified labor.

Recovery from Recession and Inflation Expectations

The economy, which is expected to shrink during the April-June period of this year, is projected to escape recession with an expected growth of 0.1% by the end of the year. The growth rate is expected to be 0.9% for 2026 and 1.4% for 2027, but these forecasts are more cautious compared to the government's predictions in October.

Regarding inflation, economists believe that due to "continuously high wage increases," price increases will decline more slowly than expected. Additionally, the existence of upside risks in the inflation outlook has also been noted.