Federal government revises economic forecast downwards

In its annual economic report for the current year, the German government forecasts growth of 1,0 percent for 2026. In the fall, it had projected 1,3 percent. The skilled trades sector criticizes the lack of consensus within the government.

In the annual economic report for this year, which has now been adopted by the Federal Cabinet, the Federal government They have revised their economic growth forecast for 2026 downwards. In the fall, they were still predicting growth of 1,3 percent. Now they are forecasting an increase of only 1,0 percent.

The German government stated that this was an important signal after the stagnation of recent years, but not yet a trend reversal. "This growth is primarily driven by government investment in modernizing infrastructure." Added to this are significant tax relief measures, such as improved corporate depreciation allowances and lower energy costs.

Additional reforms are needed

Annual Economic ReportHere you will find the Report of the Federal Government."The economic and fiscal policy measures of the federal government are expected to have a noticeable impact on growth; they alone should contribute around two-thirds of a percentage point to the increase in gross domestic product in 2026," the report states. At the same time, the government acknowledges "significantly weakened" growth prospects due to impending changes.

In order to maintain Germany's competitiveness and increase potential growth, "additional reform steps are necessary to secure the skilled workforce, reduce bureaucratic burdens, digitize public administration and reduce energy costs".

Announced reformsThe German government announces further reforms to secure growth, employment and prosperity:

- The plan is to reduce excessive bureaucracy: with a concrete plan for billions in bureaucracy relief, with the modernization agenda and the acceleration of planning and approval procedures.
- With the High-Tech Agenda Germany, the German Federal Government promotes key future innovations. The Germany Fund is intended to mobilize private investment.
Energy costs are to be reduced further. For energy- and trade-intensive sectors, this is to be achieved through an industrial electricity price and the expansion of electricity price compensation. The active pension, the reformed basic income support, and facilitated regular immigration of skilled workers are intended to increase the labor supply.
- The planned reforms to the social security systems are intended to limit increased burdens on employees and employers.
Source: Federal Government

The skilled trades strike a less optimistic tone than the federal government: The predicted growth is based primarily on debt-financed government spending and thus on a "shaky foundation," explains Jörg Dittrich, President of the Central Association of German Crafts.

"This makes it all the more worrying that the draft report reveals massive disagreements within the Federal Government, not only about the right course of action, but also about the assessment of the economic situation itself. From the perspective of the skilled trades, this disagreement is a warning sign."

Problems in the trades

Jörg Dittrich Photo: © ZDH/Henning Schacht

The Ministry of Economic Affairs is pushing for regulatory policy guidelines, strengthening supply and structural reforms in line with the principles of the social market economy, while SPD-led ministries prefer state spending programs.

Dittrich: "The reality in the skilled trades shows that businesses are suffering from record levels of additional wage costs, high energy prices, an overwhelming tax and contribution burden, and virtually unchecked bureaucratic growth. At the same time, the demand for skilled workers remains high, while perverse incentives in the social security and contribution system are making work increasingly unattractive."

The delay in necessary reforms is further exacerbating the situation. "The skilled trades are particularly critical of the fact that the growth expected for 2026 is largely attributable to the so-called special fund for infrastructure and climate protection. Investments in infrastructure are important, but they do not replace reforms," ​​emphasizes Dittrich.

Reduce existing burdens

Growth fueled by debt is not sustainable growth. Without tangible relief for businesses, without viable social security systems, and without genuine deregulation, there can be no lasting economic upswing. There must be no new burdens placed on the skilled trades. Instead, existing burdens must finally be reduced.

"Total social security contributions are moving further and further away from the 40 percent mark, with noticeable consequences for net income and investment capacity. Without the courage to undertake structural reforms, without clarity in economic policy, and without a policy that consistently focuses on the realities of small and medium-sized enterprises and skilled trades, Germany will not be able to escape its economic stagnation."DHB now also digital!Simply click here and register for the digital German Crafts Journal (DHB)!