The German economy is emerging from the trough and is likely to regain some momentum over the next two years. After stagnating in the first half of the year, the Joint Economic Forecast Project Group predicts an increase in gross domestic product of 0.2% for the current year in its fall report. In the next two years, an expansive financial policy should then noticeably accelerate the increase in economic output to 1.3% and 1.4% respectively. This means that the institutes' forecast for this year and next year remains more or less unchanged compared to the spring report. "The German economy is still on shaky ground," says Dr. Geraldine Dany-Knedlik, Head of Forecasting and Economic Policy at the German Institute for Economic Research (DIW Berlin). "It will recover noticeably in the next two years. However, in view of persistent structural weaknesses, this momentum will not last."

The German government is using extended debt rules to strengthen its defense capabilities and invest in infrastructure and climate protection. According to the project group, this will provide impetus in the coming years, albeit with restrictions: Firstly, funds, for example for construction and armaments projects, flow more slowly than planned in the budget due to long planning and awarding periods. Secondly, loans also serve to avoid consolidation that is actually due. Thirdly, there will be a considerable need for consolidation in 2027 despite the postponed funds from the extended credit options.

The domestic economy is nevertheless picking up noticeably, but the structural problems are only being concealed, according to the report: Fundamental reforms to strengthen the location have failed to materialize: The prospects are deteriorating, which is also reflected in the expected decline in growth rates of production potential. High energy and unit labor costs in international comparison, a shortage of skilled workers and a further decline in competitiveness continue to slow down the long-term growth prospects.

While the service sectors, particularly in the public sector, will grow strongly over the next two years, the recovery in the manufacturing industry will probably be only modest. Foreign demand for German goods in particular is weakening - due to dwindling competitiveness and higher tariffs. As a result, strong growth in exports will not be a driver this time. Supported by the expansive financial policy, the recovery will focus on the domestic economy.

With the economic recovery, the situation on the labor market should also improve noticeably, the report predicts. Together with rising real disposable incomes, this will strengthen private consumption and thus consumer-related services. Consumer prices are expected to rise by a good two percent in the forecast period.

Overall, economic development in Germany is exposed to considerable risks: The trade dispute between the US and the EU holds great potential for escalation, particularly if EU commitments cannot be met. In addition, the macroeconomic effects of the expansionary fiscal policy are difficult to assess and depend heavily on the specific form it takes.

Germany is at a turning point in terms of economic policy, as growth prospects are deteriorating noticeably. The institutes present an economic policy compass with twelve points to guide the "Autumn of Reforms". They assume that if these reforms were implemented promptly, this would not only strengthen the long-term growth potential of the German economy, but also stimulate it in the short term.

The Joint Economic Forecast is produced twice a year on behalf of the Federal Ministry for Economic Affairs and Energy. The following were involved in the Autumn Report 2025: German Institute for Economic Research (DIW Berlin), ifo Institute - Leibniz Institute for Economic Research at the University of Munich in cooperation with the Austrian Institute of Economic Research (WIFO), Kiel Institute for the World Economy, Leibniz Institute for Economic Research Halle (IWH) and RWI - Leibniz Institute for Economic Research in cooperation with the Institute for Advanced Studies (IHS) Vienna.