Economics revise growth forecast significantly upwards

Analysis Forecast of Economics Significant growth - but tough cuts required As of: November 11th, 2026 • 2:30 p.m

The economy is growing faster again - but the Federal Government's Council of Experts is calling for tough austerity measures. And brings a kind of “Soli” for defense into play.

The so-called economists have significantly revised their economic forecast upwards for this year and next. In the current year, the price-adjusted gross domestic product (GDP) will "increase significantly again for the first time since 2022, by 1.3 percent."

This is what it says in the annual report presented today by the Council of Experts for the Assessment of Overall Economic Development (Expert Council for Economic Affairs), as the body is officially called. For 2027, the experts expect an economic increase of at least 1.0 percent.

The Council of Experts had lowered its forecast in the spring - now the trend is reversing. The annual report corrects the expected growth for this year by 0.8 percentage points upwards compared to the spring report.

The leading German economic research institutes and the federal government had also significantly increased their forecasts for the current year. They also expect economic growth of 1.3 percent for 2026.

Leading research institutes assume growth of 1.3 percent in their autumn forecast. more

The growth is driven by surprisingly strong exports, explained the Council of Experts, which, as a statutory mandate, presents a periodic assessment of Germany's overall economic development from an independent expert's perspective. Government spending is also part of the explanation.

In the coming year, government investments and private consumer spending in particular are expected to contribute to growth. The experts put inflation for this year at 2.8 percent, slightly lower than their estimate from the spring (3.0 percent). Next year, however, prices are likely to rise more than previously expected - by 3.3 percent.

However, the good news comes with an urgent warning: there is talk of a “need for action of historic proportions”. Despite growth, German public finances are under increasing pressure, economists attest.

In the medium term, foreseeable expenditure in the federal budget and social security funds significantly exceeded foreseeable income. “A limit on the increase in spending in the federal budget is inevitable,” says Monika Schnitzer, chairwoman of the Economic Advisory Council.

Debt is increasing at the federal, state and local levels. The per capita debt is almost 32,000 euros more

The experts propose a series of measures, some of which are far-reaching: starting with the full implementation of the Old Age Security Commission's proposals, including the abolition of the zero-deduction pension for those who have been insured for a particularly long time ("pension at 63"), as well as the withdrawal of the mother's pension III.

They also see a need for action in defense. Because armament is one of the biggest drivers of spending - financed primarily on credit. The Council of Experts therefore calls for loan financing via the sectoral exception to be gradually reduced from 2031.

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But even with these measures and the additional reduction of “inefficient and environmentally harmful subsidies,” a financing gap of at least 2.4 percent of GDP remains. In the medium term, an increase in sales and income taxes “could not be avoided,” writes the Council of Experts.

For example, a supplementary defense levy is mentioned. Depending on the amount (2.5, 5.0 or up to 7.5 percentage points), this could bring in up to 30.7 billion euros for 2027. Depending on the structure, this could also affect companies and corporations.

The classic tax increases involve, among other things, an increase in income tax. Two scenarios are mentioned. Scenario one calls for raising taxes for everyone - by three, six or nine percent. As an alternative scenario, the economists suggest a further increase in the second tax rate for the rich by one percentage point.

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According to the committee's calculations, the income tax increase would bring in around 11.6 billion euros next year in the most drastic case. Scenario two, the sole increase in the rich tax, would result in additional revenue of around 0.5 billion euros for 2027. The increase in sales tax is also mentioned as a possible revenue lever. However, tax increases “should only be used when other measures have been exhausted,” write the economists.

There are also far-reaching ideas for social policy - such as combining housing benefit, child allowance and basic security. “This could noticeably increase incentives to work, reduce the at-risk-of-poverty rate and ease the burden on public budgets,” said the committee.

The expert council puts the savings potential at up to 1.7 billion euros for the federal government and more than four billion euros in total - although the municipalities would face higher expenditure. This is because they currently finance, among other things, the costs of accommodation through citizens' benefit, while the current housing benefit is paid by the federal and state governments.

This topic in the program: The First | daily news | 11/11/2026 | 8:00 p.m