The German economy has made a solid start to the year, with growth of 0.3% quarter on quarter. However, the war in Iran is now clouding the economic outlook: KfW Research expects real gross domestic product (GDP) in Germany to increase by only 0.7% in 2026, followed by 1.3% in 2027. We have also revised our forecasts for real GDP in the euro area noticeably downwards but revised our inflation forecast in the opposite direction: In 2026, consumer price inflation in both Germany and the euro area is likely to be in the 3% range.

KfW Business Cycle Compass May 2026(PDF, 216 KB, accessible)

Press release