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16m ago

German Institutes Cut Growth Outlook to 0.1% for 2025 and 0.8% for 2026

Economists cite US tariffs and domestic bottlenecks for the weak outlook, warning that delayed state spending will only lift activity gradually.

Industrieroboter in einer Autofabrik in Leipzig
Wirtschaftsforscher haben ihre Wachstumsprognosen für die kommenden Jahre deutliche senken müssen.
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Overview

  • Ifo now projects GDP to rise just 0.1% in 2025 and 0.8% in 2026, while RWI and IfW also cut 2026 to around 1.0% after two years of contraction.
  • Ifo’s investment-expectations index dropped to -9.2 in November, with vehicle manufacturing plunging to -36.7, pointing to reduced corporate capital spending and weaker future capacity.
  • Higher US tariffs are estimated to subtract 0.3 percentage points from growth in 2025 and 0.6 points in 2026, adding to competitiveness losses flagged by the institutes.
  • The €500 billion special fund and other public programs are seen providing only gradual support, with estimated impacts of about +0.3 percentage points in 2026 and +0.7 in 2027 due to implementation lags.
  • Construction shows the earliest improvement as infrastructure work picks up, and forecasts suggest unemployment could ease to around 5.9% by 2027.