BERLIN (Reuters) – Germany’s planned 500-billion-euro infrastructure fund could raise economic output by an average of more than two percentage points per year over the next 10 years, Germany’s DIW economic institute said on Friday.
German chancellor-in-waiting Friedrich Merz was set to make a last-ditch attempt on Friday to convince the Greens of his plans for a massive increase in state borrowing to bolster defence and infrastructure.
DIW, one of Germany’s main economic forecasters, cut its forecasts for Europe’s largest economy on Friday for this year and next due to political uncertainty and global trade tensions.
Next year, gross domestic product will likely increase by 1.1%, down from the DIW’s December forecast of 1.2%, the institute said. This forecast does not take into account defence and infrastructure expenditures.
If a defence and infrastructure spending ramp-up is included, growth of 2.1% is expected in 2026, DIW said.
The institute expects the economy to stagnate this year, revising its previous forecast for 0.2% growth.
In 2024, Germany became the only G7 country to post a contraction for two consecutive years.
The IfW institute revised up its 2026 estimate for Germany, predicting 1.5% growth off the back of the expected boom in public spending. Like the DIW, it also expects a stagnation this year.
(Reporting by Maria Martinez, Editing by Rachel More)
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