Uncertain economists question long-term sustainability of economic rebounds

Germany's economic outlook is being downgraded by research institutions consecutively, with aspiring entrepreneurs sharing a similar gloomy perspective.

, and Administrator

2025 September 14 . 12:51 AM

2 min read

Uncertain economists question the long-term viability of the current economic rebound

Uncertain economists question long-term sustainability of economic rebounds

The German economy is projected to experience growth in the coming years, according to various economic research institutes across the country. However, the path to a self-sustaining recovery remains uncertain, as highlighted by recent reports.

The Ifo Institute, one of the leading economic research bodies in Germany, predicts a 3.6% increase in gross value added in construction for 2026 and a 4.1% increase for 2027. This optimistic outlook is not universal, as other institutes, including those in Munich, Essen, Halle, and Kiel, have downgraded their forecasts for the German economy.

For the current year, economic research institutes are only expecting minimal growth of between 0.1 and 0.2%. This growth is primarily driven by fiscal stimuli from the state, including increased spending from the infrastructure fund and higher defense expenditures. However, the increase in the manufacturing sector without construction is much more modest, at 0.9 or 1.2%.

Equipment investments, a crucial factor in economic growth, are currently stagnant at the level of 2015. Economists are concerned about this stagnation, with Clemens Fuest, President of the Ifo Institute, warning of a "flash in the pan" effect if the announced reforms by the federal government do not materialize.

High energy costs, bureaucratic burdens, and inadequate digital infrastructure are identified as key factors braking investment readiness in Germany. Without necessary reforms, a sustainable stabilization of the economy may not occur. In the medium term, the economic situation could be more serious due to a higher debt level and greater interest burdens, further constraining the investment scope of the state.

Clemens Fuest also warns about the impact of these issues on potential company founders. The number of newly founded companies in 2024 fell by 0.2% to 160,852, which is the lowest number since records began 30 years ago. The institution Creditreform registered the lowest number of company formations in Germany in 2024, reporting a historic low of 160,852 new companies founded.

In conclusion, while the German economy is expected to grow in the coming years, the path to a self-sustaining recovery remains uncertain. The stagnation in equipment investments, high energy costs, bureaucratic burdens, and inadequate digital infrastructure are significant challenges that need to be addressed to ensure a sustainable and robust economic recovery.