The gap between expectations and reality is growing
Our 2025 analysis examined how five forecasting institutions selected for their international weight (IMF, OECD, European Commission, Kiel Institute, Bundesbank) had consistently overestimated German economic growth since 2018, with particularly striking estimation errors in the year following the outbreak of the Russia-Ukraine war. The 2024 data published since then confirmed that the trend had worsened: overestimation errors ranged between -0.5 and -1.3 percentage points at most institutions for 2024. The difference between the latest forecasts for 2025 and actual economic growth shows that this distortion has not been corrected but has continued.
Two distinct periods of forecasts
An analysis of quarterly forecasts between 2015 and 2025 reveals two sharply contrasting periods. Between 2015 and 2017, forecasters underestimated German growth on average, as its economy expanded faster than expected. However, this trend reversed in 2018, marking the beginning of a period of overestimation that has continued ever since.
The period between 2020 and 2022 posed a particularly big challenge for forecasting institutions. The shock of the pandemic and the Russia-Ukraine war created an extremely uncertain environment, in which forecasting models produced both significant underestimates and overestimates in various quarters. However, the key pattern emerged during the years of war: In 2022, German economic growth fell short of forecasts by around 1.8 percentage points. This gap narrowed only moderately in 2023 and 2024, remaining at around 1 percentage point. It is noteworthy that, despite the recession in 2023, forecasts still overestimated growth for 2024 and continued to be overly optimistic about the outlook for 2025.
[1]Structural challenges
The excessive optimism of current economic forecasts differs from previous distortions in that it does not stem from a misunderstanding of temporary, cyclical factors, but from an underestimation of deeper structural problems. Economic overestimations that have been around for almost a decade reveal that the main cause is not simply economic fluctuations but rather changes in the structure of the economy.
Germany’s energy-intensive industries continue to face serious competitive disadvantages. Electricity prices for industrial users in the European Union are still more than twice as high as in the United States, giving US market players a long-term cost advantage. This price difference proved to be not a temporary phenomenon, but a lasting burden that led to the permanent relocation of part of manufacturing production abroad.[2]
This has clear consequences in production data. In June 2025, industrial output fell to its lowest level since May 2020, while production in energy-intensive sectors declined by 7.5% on an annual basis. The gross value added of the manufacturing industry has fallen for several consecutive quarters, suggesting that this is not merely a temporary decline in demand, but that actual production capacity has disappeared from the economy.
In contrast, forecasting institutions continue to assume that the German economy may eventually return to its pre-crisis growth track. However, empirical data available up to 2026 do not support this assumption. Unlike temporary demand shocks, permanent structural capacity losses do not correct themselves over time but rather constrain the economy’s growth and production potential in the long term.
Comparison with last year’s assessment
Our 2025 analysis concluded that forecasters underestimated the economic damage caused by European sanctions policy and geopolitical turmoil. Our current research confirms and expands on this argument: not only were the immediate effects of the shocks greater than expected, but the additional costs arising from structural adjustment (i.e., lost economic output) also far exceeded previous expectations.
When analysing data for 2024, the short-term effects of temporary geopolitical shocks make the work of forecasters more difficult, so a temporary increase in estimation error is understandable. The same arguments no longer provide a satisfactory explanation for the overestimation regarding data for 2025. With manufacturing capacity continuing to decline and no signs of recovery in sight, economic growth forecasts remain systematically biased despite lower energy prices and the European Central Bank’s easing monetary policy.
Data available for 2025 show that the gap between forecasts and the actual performance of the German economy remains significant. This phenomenon is not a series of isolated estimation errors, but rather a reflection of systemic bias on the part of forecasting institutions.
[1] Heatmap explanation (in brief): Quarterly forecasts from 2015 to 2024 from five institutions (IMF, OECD, European Commission, Kiel Institut, Bundesbank) are all biased in the same direction. Each heat map cell shows the deviation of the forecast issued in a given quarter of a given year from the actual data and the same for the forecast issued in the same quarter of the previous year. Source: Websites of the listed organisations, Destatis.
[2] https://www.rolandberger.com/en/Insights/Publications/The-German-economy-in-the-second-half-of-2025.html
