Germany's RWI institute upgrades economic growth forecasts for 2026, 2027

By Maria Martinez

BERLIN, Sept 3 (Reuters) - Germany's RWI economic institute sharply raised its growth forecasts for Europe's largest economy on Thursday, after exports and higher government spending drove a stronger-than-expected recovery in the first half of the year.

Germany's economy will grow by 1.3% in 2026, RWI said, upwardly revising its forecast of 0.8% growth in June.

It expects gross domestic product to expand by 1.1% in 2027, also up from its earlier 0.8% forecast, before growth slows to 0.5% in 2028.

The DIW Berlin economic institute also raised its forecasts for the German economy on Wednesday.

Despite higher prices due to the Iran conflict and uncertainty caused by U.S. tariffs, the German economy has shown resilience and grew by 0.3% in the second quarter, supported by a strong increase in exports.

RWI cautioned that export momentum would likely weaken later this year, saying recent gains reflected temporary effects, including a rebound after tariff-related disruptions, rather than a lasting improvement in German competitiveness.

"The recovery is here, but the structural problems have not disappeared," RWI economic chief Torsten Schmidt said.

High energy prices, bureaucracy and weak competitiveness continue to weigh on investment, while private consumption remains subdued due to labour-market uncertainty, RWI said.

(Reporting by Maria Martinez, Editing by Miranda Murray)