IW survey: German companies expect little upswing in 2026

Berlin. The German economy is facing another difficult year. This is indicated by a new economic survey from the Cologne-based Institute for Economic Research (IW). No change in sentiment among German companies or a genuine economic upswing is apparent. Many firms are planning job cuts.

After two years without economic growth, the German government and economic research institutes expect at best minimal growth for the current year. Following a decline in the spring, gross domestic product (GDP) stagnated in the third quarter.

The German government expects GDP growth of 1.3 percent for the coming year. This growth is expected to be driven primarily by billions of euros in government spending on infrastructure, climate protection, and defense. However, business associations are calling for fundamental structural reforms, citing comparatively high energy prices and taxes, as well as rising social security contributions.

Business expectations for 2026 do not foresee any noticeable upswing. According to a survey by the employer-affiliated IW (German Economic Institute), while a quarter of the surveyed companies anticipate higher production or business activity than in 2025, almost a third expect a decline.

The situation remains particularly difficult for industry. According to the survey, production expectations are also negative for the coming year. The German industry is being disproportionately affected by trade conflicts, geopolitical upheavals, and the resulting weaker global economy, according to the IW (German Economic Institute). Added to this are renewed threats to the supply of raw materials and supplies, as well as weakened competitiveness due to high energy, regulatory, and labor costs. Private-sector service providers are also pessimistic about the coming year. In contrast, the business situation in the construction industry has improved significantly.

The ongoing crisis is also impacting investments. According to the German Economic Institute (IW), 33 percent of all companies are planning lower investment budgets next year, while only 23 percent plan to increase them. The long-standing investment crisis in German industry is likely to worsen, putting further pressure on the industrial base. The job losses in industry that have already begun in the next three years will continue into 2026: 41 percent of industrial companies plan to reduce their workforce, while only 15 percent plan to increase it.

The federal government had decided on tax relief measures with the aim of encouraging companies to invest more.

RND/dpa