Nagel outlines German economic outlook and global cooperation challenges
Deutsche Bundesbank President Joachim Nagel presented the economic outlook for Germany and discussed multifaceted global challenges at a Berlin event on January 26, 2026. He emphasized the importance of rules-based international cooperation.
Germany's gradual return to growth
Deutsche Bundesbank's latest forecast projects German HICP inflation to reach 2.2 percent in 2026, stabilizing around 2 percent in 2027 and 2028. Gross domestic product growth is expected to accelerate from 0.3 percent in 2025 to 0.6 percent in 2026, and further to 1.3 percent in 2027. This expansion will be supported by an expansionary fiscal stance, with government spending on defence and infrastructure contributing an estimated 1.3 percentage points to GDP growth by 2028. However, government deficit and debt ratios are forecast to rise significantly, with debt reaching 68 percent and the deficit 4.8 percent by 2028, necessitating a robust budget plan.
Household demand is anticipated to revive, while business investment remains dampened.
Exports are expected to slowly return to an expansion path, despite higher tariffs, leading to a decrease in the current account surplus from 4.7 percent in 2025 to 3.2 percent in 2028.
Cooperation in a challenging world
Nagel identified persistent international challenges, including trade disputes, geopolitical conflicts, and the rapid rise of artificial intelligence.
He also noted digital innovation and climate change.
To address these, Nagel advocated for rules-based international cooperation, leveraging established institutions.
He cited the Financial Stability Board (FSB), the Bank for International Settlements (BIS), and the International Monetary Fund (IMF) as crucial for global financial stability.
The BIS Innovation Hub and the Network for Greening the Financial System (NGFS) were highlighted as successful models for collaborative action on new technologies and sustainable finance.
Pragmatism in a fragmented era
Nagel's speech offers a pragmatic, yet cautious, assessment of Germany's economic trajectory amidst significant global headwinds.
The domestic outlook, while showing signs of recovery, remains vulnerable to persistent global uncertainties.
This highlights central banks' limited direct influence over geopolitical and trade dynamics, forcing a focus on institutional resilience.