(de-news.com) – The government’s Annual Economic Report was presented by Federal Minister for Economic Affairs Katherina Reiche (CDU), who used the occasion to underscore the need for far-reaching structural adjustments across core policy domains, including labor markets, social security systems, taxation, and energy pricing. Following two consecutive years marked by contraction and stagnation, culminating in 2025, the federal government is forecasting economic growth of 1 percent for the current year. This outlook was deliberately framed with caution, notwithstanding the prospect of recovery, as the effects of recently adopted fiscal and economic policy measures have so far proven slower to materialize than originally projected. Against this backdrop, Reiche argued that the present reform window must be used with determination to secure long-term growth potential, emphasizing that an emerging cyclical upswing now requires active and decisive policy reinforcement rather than passive observation.
According to the report, the government intends to counter the economic downturn through a coordinated reform agenda spanning six central areas of supply-side policy. These include a concerted effort to reduce bureaucratic burdens and modernize public administration; accelerated investment in infrastructure aimed at enhancing Germany’s attractiveness as a business location; strengthened innovation policy through improved conditions for startups and the diffusion of new technologies; a reduction in energy system costs while maintaining security of supply; measures to expand labor supply by improving work incentives and reforming social security arrangements; and the reinforcement of external economic resilience through diversification strategies and deeper integration within the European Union. As the government’s principal economic policy strategy document, published annually at the start of the year, the report also revises the medium-term outlook. For 2026, it projects growth of just one percent and revises downward the estimate of potential output, signaling more subdued expectations for the economy’s underlying capacity.
2026 growth forecast reaffirmed by the Federal Cabinet
Following the cabinet’s formal adoption of the report, the growth forecast for 2026 was reaffirmed, with government representatives stressing that, despite persistent headwinds, incremental progress was still expected. The anticipated recovery is largely predicated on stronger domestic demand, while some alleviation of external constraints is also assumed. Media reports indicated that the Federal Cabinet devoted an unusually extended period to deliberating the report, a detail widely interpreted as reflecting the political sensitivity and strategic significance of the economic assessment.
The government further announced that Federal Chancellor Friedrich Merz informed the Federal Cabinet on the same day of the reappointment of the members of the German Council for Sustainable Development. The 15-member advisory body is tasked with supporting the government in advancing the German Sustainable Development Strategy, with an explicit mandate to transform the existing framework into a more citizen-focused and action-oriented approach. In fulfilling this role, the council addresses the social, environmental, and economic dimensions of sustainability while also serving as an intermediary between public discourse and governmental decision-making. Members are appointed by the chancellor for three-year terms, and the newly constituted council—comprising nine men and six women—is expected to convene for its inaugural meeting in the near future.
