The German economy in 2026

German economy in 2026: expected growth of 1% is considered insufficient amid structural challenges

    According to the forecast of the German Chamber of Commerce and Industry (DIHK), Europe's largest economy will grow by 1% in 2026. Although this figure is higher than the previous forecast of 0.7%, experts call it insufficient for a sustainable recovery. Against the background of continuing structural problems — high transaction costs, weak domestic demand and bureaucratic barriers — the German economy continues to lag behind more dynamic competitors. These macroeconomic signals are of direct importance for the global forest market, where Germany is one of the key producers and consumers of timber.

DIHK forecast: growth, but insufficient

    The head of the German Chamber of Commerce and Industry, Helena Melnikova, presented an updated forecast for the country's economy, stressing that even the revised upward expectations are not encouraging.

"This is too little, our competitors are more dynamic" — Helena Melnikova, Head of DIHK

Key indicators:

•     - GDP growth forecast for 2026: 1% (revised up from 0.7%)
•     - GDP growth in 2025: 0.2% (adjusted for inflation)
•     - Dynamics of previous years: recession in 2023 (-0.9%) and 2024 (-0.5%)
•  

Main business risks

    A survey conducted by DIHK among about 26,000 companies from various sectors and regions of Germany has identified key factors holding back economic growth.:

    These data indicate that the German business is in a wait-and-see attitude. Investment activity remains subdued: only 23% of respondents plan to increase capital expenditures, while 31% intend to reduce them.

A call for reform

    Helena Melnikova appealed to the government to accelerate the implementation of structural reforms:

"With the handbrake on, we won't get out of the pit"

The main areas requiring reforms are:

• - Reduction of bureaucracy: simplification of administrative procedures for businesses.
• - Reducing labor costs: reducing the tax burden on companies.
• - Reduction of energy costs: ensuring the availability of energy for industry.
•  

Importance for the forest market

    Germany occupies a key position in the European forestry industry. The country is:

•     - One of the largest lumber producers in Europe.
•     - An important exporter of coniferous wood, including to China and the USA.
•     - A major consumer of wood for construction, furniture industry and production of slab materials.
•  

    The weak macroeconomic dynamics of Germany has a direct impact on the forest market:

1. - Domestic demand under pressure: Weak domestic demand (59% of companies call it the main risk) means a decrease in purchases of lumber for construction, repair and furniture production. This may lead to an oversupply of the domestic market and increased export pressure.
2. - High energy consumption: Energy consumption remains a critical factor for timber processing enterprises (sawmills, production of slabs, drying of lumber). High energy prices squeeze margins and limit investment opportunities.
3. - Restrained investments: A reduction in the investment plans of enterprises (31% plan to decrease) means that modernization of capacities and expansion of production are postponed. This may affect the long-term competitiveness of the German forestry sector.
4. - Export pressure: In conditions of weak domestic demand, German manufacturers will be forced to increase export activity, which may lead to price competition in global markets, including China and the United States.
5.  

The context for the global market

    The economic situation in Germany is an important indicator for the entire European forest market. A weak recovery in the EU's largest economy will restrain demand for timber in the region. This, in turn, will have an impact on:

•     - Price dynamics on European stock exchanges and in contracts.
•     - The volume of exports from the Baltic States, Scandinavia and Central Europe.
•     - Competition for market share in third countries (China, USA, Middle East).
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Forecast and conclusions

    The expected growth of the German economy by 1% in 2026, although it is a step forward after two years of recession, does not create a fundamental basis for a sustainable recovery of the forestry sector. Key structural issues — high costs, weak demand, and bureaucracy — remain unresolved.

    For the participants of the global forest market, this means:

•     - Maintaining a cautious approach to forecasting German demand.
•     - Attention to the export activity of German manufacturers as a factor of price competition.
•     - Monitoring of reform initiatives that can change the investment climate in the sector.

    The situation in Germany serves as a reminder that the recovery of forest markets in Europe will be slower than in other regions of the world, and will depend not only on industry factors, but also on the success of macroeconomic policies of the continent's largest economies.

Key macroeconomic indicators:

Tags: #Germany #economy #GDP #DIHK #forestry market #construction sector #macroeconomics #Europe #energy consumption #investments