By Maria Martinez
BERLIN (Reuters) -The German economy is expected to grow this year following two consecutive years of contraction, two economic institutes said on Thursday, raising their forecasts for 2025 and 2026.
The Kiel Institute for the World Economy (IfW) raised its forecast to 0.3% growth from the stagnation it had previously envisaged.
The revision is due to a better-than-expected first quarter, when the economy grew by 0.4%.
“The German economy is seeing some light at the end of the tunnel,” the economists said in their new forecasts.
They are also more optimistic about next year, raising the forecast for Europe’s largest economy to 1.6% growth from the previous forecast of 1.5% in 2026.
The Leibniz Institute for Economic Research (RWI) said on Thursday it expects 0.3% growth this year and 1.5% in 2026.
Despite short-term burdens due to trade policy uncertainties, a gradual recovery is emerging for the second half of the year, said Torsten Schmidt, head of forecasts at RWI.
“It is now important that the federal government’s announcements are followed by actions,” Schmidt said.
The German cabinet approved a 46-billion-euro ($52.94 billion) tax relief package last week to support companies and revive its sluggish economy.
Germany’s parliament also approved plans for a massive spending surge in March.
(Reporting by Maria Martinez and Rene Wagner,Editing by Madeline Chambers and Friederike Heine)
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