DIW raises German economic growth forecasts as exports beat expectations

The German Institute for Economic Research, DIW Berlin, sharply raised its growth forecasts for Europe's largest economy on Wednesday, citing stronger-than-expected exports and a milder energy price shock from the Iran war.

DIW now expects Germany's economy to grow 1.2% in 2026, more than double its previous forecast of 0.5%, followed by expansions of 1.0% in 2027 and 0.7% in 2028.

"The German economy is recovering somewhat better this year than expected, but it is still standing on rather shaky ground," said Geraldine Dany-Knedlik, head of economic forecasting at DIW.

Despite higher prices due to the Iran conflict and the uncertainty from U.S. tariffs, the German economy has shown resilience and grew by 0.3% in the second quarter.

The institute warned that the recovery remained fragile, with high gas prices, weak household demand and structural problems in industry likely to curb momentum in the second half of the year.