Germany's Economic Growth Projected to Lag Behind EU Average Despite Improvement

According to the latest autumn forecast released by the European Commission, Germany's economy is expected to grow in the coming year but will continue to trail the average growth rate of the European Union. The report indicates that Germany's gross domestic product (GDP) is anticipated to rise by 1.2 percent in 2026, compared to the EU average of 1.4 percent. Eurozone countries are also predicted to see an average GDP increase of 1.2 percent for the same period.

The economic outlook for Germany has improved compared to previous forecasts. Earlier this year, projections suggested stagnation for 2025 and a slightly lower growth rate for 2026. The European Commission has now revised its estimate for 2025, expecting a modest economic expansion of 0.2 percent, which still places Germany among the slowest-growing economies within the EU. Only Finland is forecasted to have a lower GDP growth rate at 0.1 percent in 2025.

The Commission's analysis attributes the anticipated growth to several factors, including a resilient labor market, rising consumer purchasing power, and favorable financing conditions. These elements are expected to support moderate economic expansion in the near term. Additionally, national fiscal consolidation efforts across EU member states are likely to be partially offset by financial support from EU funds, helping to sustain domestic demand.

Domestic consumption is projected to remain the primary driver of growth throughout the forecast period. The report also expects private consumption to rise steadily, helped by a gradual reduction in the savings rate. Investment activity is predicted to gain momentum, further supporting the overall economic outlook for Germany and the EU.

However, the forecast also outlines several risks that could impact growth prospects. The international trade environment remains challenging, with global trade barriers reaching record levels. The report notes that the European Union faces higher tariffs on exports to the United States compared to earlier estimates, mainly due to recent changes in U.S. trade policy. Despite this, EU exporters still encounter lower tariffs than many other major global economic players, providing a relative competitive advantage.

Geopolitical tensions are also cited as potential risks that could disrupt supply chains and increase market volatility. For example, escalating trade disputes or additional restrictions imposed by major trading partners could hinder economic growth. Moreover, the report highlights the possibility that climate-related disasters may occur more frequently, which could negatively affect economic performance across the region.

Looking further ahead, the Commission's outlook for 2027 remains cautious. EU GDP growth is expected to reach 1.5 percent, while the eurozone is projected to grow by 1.4 percent. Germany's economic growth is forecasted to remain at 1.2 percent, reflecting ongoing challenges in narrowing the gap with the broader EU average.

The European Commission's projections for Germany are broadly in line with recent estimates from the German government, which forecast a 1.3 percent GDP increase for 2026. Other organizations, such as the International Monetary Fund and Germany's Council of Economic Experts, have issued more conservative predictions, estimating growth of around 0.9 percent for the same period. Even with these varied forecasts, Germany is expected to remain near the bottom of EU growth rankings, though it may perform similarly to France and slightly better than Italy.

Among the EU member states, Malta and Poland are expected to lead in economic growth, with Malta's GDP projected to climb by 3.8 percent and Poland's by 3.5 percent in 2026. Ireland, by contrast, is anticipated to see only a 0.2 percent increase, the lowest in the bloc.

Overall, the European Commission's latest economic outlook emphasizes both the progress and the persistent challenges facing Germany and the EU. While moderate growth is expected, ongoing risks related to trade, geopolitics, and climate change continue to shape the economic landscape and may influence future performance.