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2w ago

German Think Tanks Cut 2025 Growth Outlook to 0.2%, Warn Recovery Leans on State Spending

RWI and Ifo say structural headwinds and trade frictions are holding back a private‑investment rebound.

Buildings on the bank of the River Spree and the television tower in Berlin, Germany, August 17, 2025. REUTERS/Annegret Hilse/File Photo
People walk at the promenade by the river Rhine with the skyline including Rheinturm in the background in Duesseldorf, Germany, May 13, 2024. Picture taken with long exposure. REUTERS/Jana Rodenbusch/File Photo
A view shows the Reichstag building, the seat of the German parliament, the Bundestag, in Berlin, Germany, March 5, 2025. REUTERS/Liesa Johannssen/File Photo
A general view shows the river Rhine and the skyline including the Rheinturm and Rheinkniebruecke in Duesseldorf, Germany, May 13, 2024. REUTERS/Jana Rodenbusch/File Photo

Overview

  • RWI and Ifo both now see Germany growing just 0.2% in 2025, with only a modest pickup projected through 2027.
  • Ifo forecasts GDP at 1.3% in 2026 and 1.6% in 2027, while RWI projects 1.1% and 1.4% respectively.
  • The institutes expect fiscal impulses to provide most of the lift from 2026, with Ifo estimating €9 billion this year, €38 billion in 2026 and €19 billion in 2027, and RWI cautioning that state outlays cannot replace private investment.
  • Ifo flags U.S. tariffs, weak global demand, high energy costs and a slide in industrial output as key drags on the export‑reliant economy.
  • RWI sees the general government deficit rising to about €158 billion in 2026 and €170 billion in 2027, while both institutes expect unemployment to hover above 6% near term and inflation to track around the ECB’s 2% goal.