Germany's IMK institute more than doubles economic growth forecast for 2026

By Maria Martinez

BERLIN, Sept 17 (Reuters) - Germany's IMK economic institute on Thursday more than doubled its growth forecast for this year, citing stronger-than-expected exports in the first half and higher government spending on defence and infrastructure.

The Macroeconomic Policy Institute (IMK) forecast gross domestic product to grow 1.3% in 2026, up from a previous forecast of 0.6%. It foresees growth of 1.4% in 2027, compared to an earlier estimate of 0.9%.

The economic institutes Ifo, DIW and RWI have also recently raised their forecasts following a stronger than expected first half of the year.

"Germany as a business location is more resilient than many recent dire predictions would suggest," IMK's Sebastian Dullien said on Thursday.

However, the recovery is not yet self-sustaining as high energy prices and economic policy uncertainty are weighing on household consumption, he said.

Private consumption is expected to add only 0.1 percentage point to GDP growth this year, while government consumption, including additional spending on the armed forces and ammunition, is set to contribute 0.7 points, the institute said.

IMK forecast inflation of 2.7% in 2026 and 2.9% in 2027, while it expects the unemployment rate to remain at 6.4% in both years.

(Reporting by Maria Martinez and Klaus Lauer, Editing by Friederike Heine)