Overview
- Bundesbank predicts Germany’s GDP will remain flat in 2025 and grow just 0.7 percent in 2026 under its baseline scenario, missing government and EU projections.
- The central bank warns that full implementation of US tariffs could push output down 0.5 percent this year and 0.2 percent in 2026 before a 1 percent rebound in 2027.
- Exports are set to fall sharply in 2025 due to trade policy uncertainty, with only a modest recovery next year, weighing on industrial investment and wage growth.
- Planned increases in infrastructure and defence spending, supported by relaxed fiscal rules, are projected to lift growth only by the end of 2027.
- Headline inflation is expected to ease to 2.2 percent in 2025 and dip below the ECB’s 2 percent target in both 2026 and 2027, reflecting subdued domestic demand.