Germany’s economy is projected to grow by only 1% in 2026, according to the German Chamber of Industry and Commerce (DIHK), which warned that deeper reforms are needed for a sustainable recovery. The forecast marks a slight upgrade from its earlier 0.7% estimate, but DIHK managing director Helena Melnikov said the pace remains inadequate compared to global peers. Since 2019, the global economy has expanded by 19%, the U.S. by 15%, and Italy by 6%, while Germany has grown by just 0.2%, effectively stagnating over the period.

Europe’s largest economy continues to face headwinds from geopolitical uncertainty, high operating and energy costs, and weak domestic demand. Although a stronger global economy and increased public spending — particularly on security and defence — have provided limited support, DIHK noted that much of the expected growth in 2026 is driven by statistical and calendar effects rather than structural strength. The chamber urged faster reforms to reduce bureaucracy and lower labour and energy expenses.

The DIHK business climate index, based on a survey of around 26,000 companies, edged up to 95.9 points but remains well below its long-term average of 110. One in four firms expects economic conditions to worsen, while investment and hiring plans remain subdued. Only 23% of companies plan to increase investment and 12% expect to expand their workforce. However, export expectations offered a glimmer of hope, with 22% of businesses anticipating higher overseas sales over the next year.

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