Germany's Economic Outlook Brightens with Calls for Reform

Germany's economic prospects are improving as major economic institutes and the OECD revise growth forecasts upward. The Ifo Institute, RWI Leibniz Institute, and Kiel Institute now predict a 0.3% growth for the current year, improving from previous expectations of stagnation or decline. The outlook for 2026 is even more optimistic, with expectations of 1.5% to 1.6% growth.

Experts attribute this positive shift to the German government's investment funds, but stress the need for action to ensure sustained growth. Key recommendations include abolishing early retirement schemes and the spousal tax split to boost workforce participation. Additionally, reforms to address the skilled labor shortage, such as promoting immigration and digitalization, are advised.

Despite the brighter outlook, challenges remain. Concerns over trade tensions with the U.S. and the need for structural reforms underscore the importance of strategic policy decisions. The OECD emphasizes the resilience of the German economy but urges reforms to enhance business dynamics and investment activity.