16.06.2025
Plastics News by Plasteurope.com
GERMAN ECONOMY: Economists raise growth outlook / Government spending to boost output / Investors look to Europe
By Eric Culp
While a number of cultures consider Friday the 13th unlucky, Thursday the 12th brought good news to Europes largest economy, with a number of German economics institutes raising their growth forecasts for their country.
These projections put Germany on track for economic expansion over the next two years after the country reported contractions in GDP over the past two years.
While a number of cultures consider Friday the 13th unlucky, Thursday the 12th brought good news to Europes largest economy, with a number of German economics institutes raising their growth forecasts for their country.
These projections put Germany on track for economic expansion over the next two years after the country reported contractions in GDP over the past two years.
 Are the dark days over for the German economy? (Photo: PantherMedia/TTstudio) |
The Ifo Institute (Munich; www.ifo.de) said German GDP will grow 0.3% this year and 1.5% in 2026, increases of 0.1 and 0.7 percentage points respectively from its previous expectations.
Germanys Kiel Institute for the World Economy (IfW, Kiel; www.ifw-kiel.de) predicted the countrys GDP will expand 0.3% this year, which follows its earlier expectation of a flat result. The think tank nudged its outlook for next year a tenth of a percentage point higher to 1.6%.
Two other German economics institutes also raised their forecasts, and last week, the OECD said it expects the German economy to grow 0.4% this year and 1.2% next year.
German GDP rose at a quarterly rate of 0.4% in the first three months of the year, which has underpinned the recent upgrades, according to economists.
Government spending to strengthen economy
Along with the unexpectedly strong business activity last quarter, analysts point to Berlins plans to invest hundreds of billions of euros in the local economy to improve infrastructure as one reason for the optimism. Another is the likelihood that Germany will also unleash hundreds of billions for military spending.
Ifo estimated the added investments will reach EUR 10 bn this year and EUR 57 bn in 2026.
The IfW offered a more detailed breakdown: Private investment in equipment, which has been declining for two years, is set to recover this year and grow by 3.5% in 2026. Government investment in equipment particularly in military procurement is expected to rise by around 15%. Construction investment, after hitting a low point last year, is also rebounding, with a projected increase of 1% in 2025 and 3% in 2026.
Ifo estimated the added investments will reach EUR 10 bn this year and EUR 57 bn in 2026.
The IfW offered a more detailed breakdown: Private investment in equipment, which has been declining for two years, is set to recover this year and grow by 3.5% in 2026. Government investment in equipment particularly in military procurement is expected to rise by around 15%. Construction investment, after hitting a low point last year, is also rebounding, with a projected increase of 1% in 2025 and 3% in 2026.
Here comes the money
Most forecasters and the latest report from Germanys economics ministry warned of one major threat to growth: trade relations between Europe and the United States. US President Donald Trump has already instituted a number import fees on EU goods, including a blanket 10% tariff on virtually all products, a 25% mark-up for cars shipped to the US, and the levies on European steel and aluminium, which were recently doubled to 50%.
That said, investors are piling into Europe, largely due to rising uncertainty about prospects for the US and the German spending plans, according to observers. Apollo Global Management, one of the worlds four largest private equity firms, said it will invest up to USD 100 bn (EUR 87 bn) in Germany over the next decade.
Related: Mood improves among German processors, business leaders
The UK business daily Financial Times reported that Blackrock, the worlds largest asset manager, plans to invest USD 500 bn (EUR 434 bn) in the region over the 10 years, which would more than double its current holdings of USD 350 bn. (German Chancellor Friedrich Merz previously worked for the company).
And semiconductor supplier Nvidia said it has selected Germany as the site of the worlds first industrial AI-Cloud to accelerate manufacturing development.
That said, investors are piling into Europe, largely due to rising uncertainty about prospects for the US and the German spending plans, according to observers. Apollo Global Management, one of the worlds four largest private equity firms, said it will invest up to USD 100 bn (EUR 87 bn) in Germany over the next decade.
Related: Mood improves among German processors, business leaders
The UK business daily Financial Times reported that Blackrock, the worlds largest asset manager, plans to invest USD 500 bn (EUR 434 bn) in the region over the 10 years, which would more than double its current holdings of USD 350 bn. (German Chancellor Friedrich Merz previously worked for the company).
And semiconductor supplier Nvidia said it has selected Germany as the site of the worlds first industrial AI-Cloud to accelerate manufacturing development.
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