(de-news.net) Economic organizations in Germany have increased their growth projections, estimating GDP growth of 1.3 percent in 2026 and 1.1 percent in 2027. Although state-level receipts decreased, overall tax revenues rose in August. While the DGB is advocating for more robust industrial policy and sustainable growth rather than reductions in social benefits or labor protections, municipalities are requesting an additional 65 billion euros from the federal special fund to address a 231 billion euro investment backlog.
Prominent German economic research institutes have significantly raised their projections for economic growth, signaling a more positive outlook than they had anticipated in the spring. The institutes now expect Germany’s gross domestic product (GDP) to increase by 1.3 percent this year, more than twice the 0.6 percent growth rate projected in their spring forecast, according to the Handelsblatt. For 2027, they anticipate economic growth of 1.1 percent, compared with the previous projection of 0.9 percent.
The revised outlook reflects several factors that have strengthened the expected economic trajectory. Among them are stronger economic impulses resulting from increased government spending on infrastructure and defense, while the effects of geopolitical crises are understood to have weakened. Together, these developments have contributed to a more favorable assessment of Germany’s near-term growth prospects. The forecast is jointly prepared by the ifo Institute in Munich, the German Institute for Economic Research (DIW Berlin), the RWI in Essen, the Kiel Institute, and the Halle Institute for Economic Research (IWH). The figures remain tentative, however, as the official forecast is not scheduled to be released until Thursday and could still be revised before publication.
The Federal Finance Ministry’s monthly report for August shows that tax revenues in Germany increased by 1.7 percent compared with the same month of the previous year. The overall increase was supported by higher receipts from wage tax, value-added tax, and withholding taxes on interest and capital gains. At the same time, assessed income tax and corporate tax generated less revenue than in August 2025. Among the major federal taxes, receipts from the solidarity surcharge, tobacco tax, and motor vehicle tax also declined, while revenue from electricity and insurance taxes increased.
The effects of the temporary reduction in energy-tax rates on fuels in May and June were still visible in August’s revenue figures. The Finance Ministry attributed this continuing effect to the time lag between the point at which tax liabilities arise and the subsequent recording of the corresponding receipts in government accounts. At the state level, tax revenues moved in the opposite direction, declining by 3.2 percent compared with August 2025. Inheritance-tax receipts, which can fluctuate substantially from month to month, fell by 7.9 percent, while revenue from real estate transfer tax, another major state-level source, declined by 2.4 percent.
Municipal funding claim intensifies as DGB calls for growth strategy
The Association of Cities and Municipalities is calling for an additional 65 billion euros from the federal government’s special fund to be allocated to local governments. Chief Executive André Berghegger argued that municipalities require greater financial resources to address investment needs involving schools, roads, critical infrastructure, climate adaptation, and civil protection. Of the 500 billion euros in newly borrowed federal funds, 100 billion euros are currently designated for the states and municipalities, with approximately 65 billion euros being passed on to local governments.
Berghegger has argued that the existing allocation remains insufficient to address the municipalities’ estimated 231 billion euro investment backlog, particularly in schools and roads. He also pointed to additional financial requirements associated with protecting infrastructure, adapting to the effects of climate change, and strengthening civil defense. At the same time, he acknowledged that even a doubling of the special-fund allocation would not be enough to eliminate the accumulated investment backlog entirely.
Yasmin Fahimi, chair of the German Trade Union Confederation, has called on the Federal Government to make economic development a central priority rather than seeking to strengthen the economy through reductions in social benefits or weaker labor protections. The DGB is instead advocating a sustainable growth strategy combined with an active industrial policy. The federation of trade unions has also called for a nationwide day of protest on Saturday, placing its demands within a broader dispute over how economic policy should respond to Germany’s current challenges.
