The institute sees the German economy expanding by 0.1% this year, edging back up after two years of contraction. They see improved business expectations as being one to lift economic prospects, helped by higher government spending. However, US tariffs policy remains the biggest obstacle for the time being.

Looking out to 2026 and 2027, IfW forecasts that the German economy will grow by 1.3% and 1.2% respectively. Meanwhile, they are anticipating that the budget deficit will widen from 2% of GDP in 2024 to roughly 3.5% by 2027.