KfW Research expects growth spurt for 2026

KfW Research expects real GDP growth of 1.0% for 2026. Government investment and reforms could reverse the trend.

Frankfurt am Main, May 26, 2025 - According to a current forecast by KfW Research, the German economy could experience a noticeable upturn in 2026. The price-adjusted gross domestic product (GDP) is then expected to grow by 1.0% - a significant increase of 0.7 percentage points on the previous forecast. The main reasons for this optimism are planned government investments and a possible reform of the debt brake, which could provide economic impetus.

In contrast, the current year remains challenging for the German economy. After a surprising increase of 0.4% in the first quarter, KfW Research now expects the economy to stagnate overall in 2025. Originally, a slight decline was even expected.

Uncertainties due to US customs policy

US trade policy remains a major source of uncertainty. Tariffs that have already been introduced since April are weighing on German companies, particularly in the export business. According to KfW Research, the US President's threat of a drastic increase in tariffs on EU imports is currently seen primarily as a tactical measure. Nevertheless, this further increases the risk of an economic slowdown.

Increasing protectionism is not only dampening export prospects, but is also curbing German companies' willingness to invest. This is a development that is likely to be particularly relevant for start-ups with an international focus.

Subdued consumption despite real wage growth

The easing of European monetary policy and the rise in real wages in 2024 will provide slight economic relief. However, private consumption is likely to increase only moderately. This is due to a renewed slowdown in real wage growth and a weakening labor market.

Eurozone in step with Germany

Growth prospects are also subdued in the rest of the eurozone. KfW Research forecasts growth of 0.8% for 2025, which is expected to accelerate to 1.0% in 2026. While Spain's economy is robust, growth in France and Italy will be rather subdued.

Inflation expected to ease slightly

There is good news on the inflation front. KfW Research is forecasting an inflation rate of 2.1% for Germany this year, 0.3 percentage points less than previously assumed. A decline to 2.0% is expected for 2026. Inflation is also expected to weaken further in the eurozone.

2026 as a potential turning point

For start-ups, the current KfW forecast offers cautious hope: while 2025 is still characterized by uncertainty, reforms and investment stimuli could ensure noticeable economic growth from 2026. Those who plan for the long term and prepare for a challenging environment can benefit from a gradual turnaround.

Further information on the economic forecast can be found on the Kfw website.