Economy: IMF with growth forecast significantly more cautious than Merz government

Washington. According to calculations by the International Monetary Fund (IMF), the German economy will pick up speed in 2026 – albeit not as strongly as the conservative-red coalition government expected. The IMF economists are sticking to their July forecast of 0.9 percent growth, significantly more cautious than Berlin, which is hoping for growth of 1.3 percent next year.

This is likely due, among other things, to the assessment of trade uncertainties and international risks. The German government is focusing its forecast primarily on domestic demand. Stable prices, wage increases, and tax relief measures have led to an increase in private households' disposable income.

At the same time, employment is picking up. This, together, should lead to people spending more money. The billions of dollars in debt-financed government spending on infrastructure and defense should also give the economy a boost, according to Berlin.

However, the IMF expects Germany's economic growth this year to be only marginally stronger than previously expected. The Washington-based fund now expects an increase of 0.2 percent for 2025. In July, it forecast economic growth of 0.1 percent.

The IMF's expectations are thus in line with those of the German government and leading economic research institutes. In the current growth forecast, Germany continues to lag behind among the major western industrialized nations of the G7 group – even worse than, for example, France, which is reeling from a severe government crisis.

While prices in Germany appear relatively stable on paper, the general inflation rate conceals numerous goods whose prices are skyrocketing, and some that are becoming cheaper. The current development in detail.

The somewhat improved outlook for Germany is also impacting the economic forecast for the Eurozone. According to the IMF, the economy there is expected to grow by 1.2 percent this year (July: 1.0 percent). Exports of goods from the countries with the common currency remained stable due to stronger trade within Europe, while exports to the United States declined significantly, it says.

Germany and Spain, in particular, have suffered losses after US President Donald Trump's aggressive tariff policy caused uncertainty worldwide. A base tariff of 15 percent has been in effect since the summer for goods imported from the EU into the United States.

In 2026, the IMF expects growth in the eurozone to reach 1.1 percent, slightly less than previously assumed (July: 1.2 percent). This is likely due to the lack of clear, transparent, and lasting agreements between the trading partners as a result of the US tariffs, and the resulting high level of uncertainty surrounding trade policy.

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According to the IMF, the United States is likely to perform somewhat better than previously expected. Growth is expected to reach 2.0 percent this year, and 2.1 percent in 2026—0.1 percentage points higher than forecast in July.

The actual consequences of the tariffs for the US population remain unclear. So far, the impact has been minor, and inflation has only risen slightly, according to the IMF. Experts speculate that companies have so far been reluctant to pass on the increased costs to their customers.

In addition, the overall picture is distorted because many companies had already filled up their warehouses before tariffs came into force or imported goods into the United States indirectly in order to avoid US tariffs.

A look at the different product categories also paints a mixed picture. "Household appliances, for example, reflect the cost of tariffs – but many categories, including food and clothing, do not."

Overall, the picture in the US is currently not looking good, said IMF Chief Economist Pierre-Olivier Gourinchas at a press conference. The decline in the available labor force—also due to lower migration in the United States—in addition to the "tariff shock" is making the labor market even more tense. "When you have slower growth in the United States, that's not a good thing for the rest of the world," he said.

For the global economy as a whole, the organization expects growth of 3.2 percent this year (July: 3.0 percent). In 2026, the world is expected to continue growing at 3.1 percent. For one thing, the "shock" from the US tariffs has so far been smaller than feared. "Thanks to numerous trade agreements and waivers, most countries have refrained from retaliatory measures," IMF Chief Economist Gourinchas explained at a press conference. In addition, the weak dollar has cushioned rising import prices in recent months.

RND/dpa