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1h ago

RWI Cuts Germany’s 2025 Growth Forecast to 0.2% and Flags Reliance on State Spending

The institute expects fiscal stimulus to carry much of the expansion from 2026, reflecting weak private investment.

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

Overview

  • RWI now projects GDP growth of 0.2% in 2025, 1.1% in 2026, and 1.4% in 2027 after trimming its summer outlook.
  • Fiscal impulses of about 0.9% of GDP per year from 2026 are expected to provide most of the lift to activity.
  • Chief economist Torsten Schmidt said government programs can stabilize the economy in the short term but do not resolve competitiveness problems.
  • The general government deficit is forecast to widen from roughly €116 billion to just under €158 billion in 2026 and to €170 billion in 2027.
  • Unemployment is seen staying above 6% but easing from 6.3% in 2025 to 6.1% in 2027, with inflation hovering near the ECB’s 2% target.