Bundesbank forecasts German economy to regain momentum by year-end

Germany’s central bank expects the country’s economic recovery to hit a speed bump in the third quarter of 2026, only to accelerate again as the year closes out. The culprit behind the temporary slowdown is about as old-school as it gets: not enough water in the Rhine River. The Bundesbank’s August 2026 Monthly Report lays out a picture of an economy that is genuinely healing, just not in a straight line. Historically low water levels on the Rhine, one of Europe’s most critical commercial waterways, are disrupting industrial operations across western Germany. The numbers behind the forecast In its June 2026 projections, the Bundesbank pegged calendar-adjusted real GDP growth at 0.5% for the full year. The central bank sees growth climbing to 0.8% in 2027 and then 1.4% in 2028. Expansionary fiscal policies, driven primarily by ramped-up defense and infrastructure spending, are projected to add roughly 1.3 percentage points to cumulative GDP growth through 2028. The IW institute raised its 2026 German growth forecast to 1.2% on September 20, up from a previous estimate of just 0.4%. That revision was driven by stronger-than-expected export performance and government spending during t...