The German government has raised its GDP growth forecast for 2026 by 0.8 percentage points, bringing the expected growth rate to 1.3%. This update comes as the economy has shown "more resilient than expected" performance, even in the face of ongoing conflict in the Middle East. The new projection matches the views of major German economic research institutes, which had expressed similar expectations just two weeks earlier. This growth could be a welcome development for conservative Chancellor Friedrich Merz, whose government is currently dealing with internal conflicts and declining public approval. According to the Ministry of Economy, Germany's economy is on a path toward growth, with the main drivers expected to be foreign trade. An "exceptional development" in the second quarter of the year occurred despite the energy shock caused by the war in the Middle East. This was partly due to restocking of energy-intensive goods produced in Germany. Additionally, significant public investments in defense and infrastructure are contributing positively to the economic outlook. However, private consumption is expected to remain relatively low, growing by only 0.3% in 2026, compared to 1.3% in the previous year. This is due to high energy prices and the strong savings habits of German consumers. Inflation in Germany reached 3.3% in September, the highest level in nearly three years. The Ministry of Economy warned that factors like geopolitical uncertainties, low industrial capacity utilization, and rising costs of materials and financing could slow the growth of private investments. For the years 2027 and 2028, Germany expects GDP growth of 1.1% and 0.6%, respectively. These future projections largely depend on the ongoing conflicts in the Middle East and Ukraine. At the end of September, the main German economic institutes advised the government not to delay adjusting its reform agenda, despite recent local election losses suffered by Chancellor Merz's conservative party. While there are signs of economic recovery, economists remain concerned about long-term structural issues, such as high energy prices, a shortage of skilled workers, and the challenges of an aging population.