German economy expected to grow 1% this year: DIHK

ISTANBUL

The Association of German Chambers of Industry and Commerce (DIHK) raised its 2026 growth forecast for the German economy on Tuesday from 0.7% to 1%.

The upgrade was primarily due to statistical and calendar effects, while the association warned that despite slight improvements, structural problems are hindering a sustainable recovery.

In contrast, Europe's largest economy is struggling to gain momentum due to geopolitical uncertainties, high operating costs, and weak domestic demand, according to DIHK.

In the association's Economic Outlook survey, 59% of companies reported seeing weak domestic demand as the biggest economic risk. Another 59% identified rising personnel costs as a serious threat to production.

Approximately six out of 10 companies surveyed considered uncertainties in government economic policies as a risk. Furthermore, 48% stated that high energy and raw material prices negatively impacted operational profitability.

Despite the €500 billion ($591 billion) infrastructure fund and investment incentives approved by the German government in June 2025, a cautious wait-and-see attitude persists in the business world. Only 23% of companies surveyed plan to increase their investments, while 31% aim to reduce them.

Private sector investment in the country remains 11% below pre-COVID-19 levels.

The negative trend in the labor market is also deepening. Some 23% of companies anticipate reducing their workforce, while only 12% plan to create new jobs.

The most optimistic data came from the export sector. Despite the turmoil in trade policies, the percentage of companies predicting an increase in exports over the next 12 months rose by 3 points compared to the previous survey, reaching 22%.

Commenting on the results, DIHK CEO Helena Melnikov stated that the projected 1% growth is "too little," and that their competitors are more dynamic.

Noting that the global economy has grown by 19% since 2019, the US economy by 15%, and Italy by 6%, Melnikov said: “Only in Germany have we stagnated at 0.2% since 2019."

"Anyone who wants to secure our prosperity must now work consistently on the key factors for business location," she added.