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Germany's economic slowdown forces sharp cuts to growth and tax forecasts

A shrinking economy and plummeting tax income leave Germany bracing for tighter budgets. Will a small surplus by 2028 be enough to ease the crisis?

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2026 May 7 . 2:15 AM

1 min read

The image shows a graph depicting the lost revenue by extent of global economic losses. The graph... — The image shows a graph depicting the lost revenue by extent of global economic losses. The graph is accompanied by text that provides further details about the data.

Germany's economic slowdown forces sharp cuts to growth and tax forecasts

Germany’s economic outlook has weakened further, with the government slashing its growth forecasts. In April, officials cut the 2023 projection in half to just 0.5 percent. The revised figures will shape the latest tax revenue estimates, due to be presented this week. The updated growth estimate directly affects tax expectations. Income tax from assessments dropped by about four percent in March compared to last year. Corporate tax revenues also fell sharply, declining by roughly twelve percent in the same month.

Trade tax continues to lag, putting pressure on local councils already facing record deficits. Despite the downturn, overall tax income for federal, state, and municipal governments is predicted to dip only slightly. Berlin’s tax revenues have held steady, even as the broader economy struggles.

New tax laws have further reduced expected income, cutting €6.3 billion from earlier 2027 projections. However, internal forecasts suggest a small surplus—around €1.3 billion—could emerge between 2026 and 2028.

Finance Minister Lars Klingbeil (SPD) will unveil the full tax forecast on Thursday. The report will outline how lower growth and policy changes are reshaping public finances. The revised projections highlight a period of tighter budgets ahead. Municipalities and federal authorities must now plan for reduced revenues while managing existing deficits. The forecast will serve as a key reference for spending decisions in the coming years.