ABN AMRO’s Chief Economist Germany, Alexander Krüger, has reported that German economic output is rising, prompting the bank to revise its Gross Domestic Product (GDP) growth forecast for 2026 upward to 1.3% and for 2027 to 1.1% [1]. The bank notes that solid GDP growth has been recorded for three consecutive quarters, indicating resilience in the German economy despite ongoing geopolitical tensions such as the Iran war [1]. However, Krüger highlights that the cumulative growth gap between Germany and other euro-area countries since the end of the Covid pandemic remains wide and is unlikely to close soon, largely due to the composition of GDP growth being driven significantly by debt-financed government consumption [1].
Public investment, including increased defence spending, is expected to continue rising and support growth, but the spillover effect to other demand components is projected to remain limited. Elevated energy prices and a more uncertain labour market outlook are anticipated to constrain the recovery in private consumption [1]. Statistical upward revisions have also contributed to the improved growth outlook, raising cumulative growth over 2011–2021 by 0.8 percentage points [1].
On the inflation front, ABN AMRO expects companies to pass most higher costs onto consumers, resulting in an inflation rate likely to hover just below 3.0% over the coming months [1]. The bank projects inflation to move broadly back towards the European Central Bank's (ECB) 2.0% target by spring 2027, but warns that risks to this outlook are tilted to the upside [1]. Potential disruptions from US tariff policy and supply-chain developments are being closely monitored as possible threats to the economic trajectory [1].
Overall, ABN AMRO describes the growth trajectory for Germany as ranging from subdued to solid, with optimism tempered by structural headwinds and external risks. The outlook remains cautious, with the recovery in private consumption expected to be limited and inflation risks persisting [1].
CONCLUSION
ABN AMRO's upward revision of Germany's GDP growth forecasts signals cautious optimism, supported by resilient public investment and recent statistical adjustments. However, persistent inflation risks and structural challenges, particularly in private consumption, suggest that Germany's economic recovery will remain moderate. Market participants should remain alert to potential disruptions from external factors such as US tariff policy and supply-chain issues.