The German Council of Economic Experts has lowered its forecast for Germany’s economy, now expecting stagnation in 2025 amid industrial challenges and ongoing impacts from U.S. tariffs, while modest growth is anticipated to resume in 2026 thanks to a major fiscal stimulus plan.
The German Council of Economic Experts, the academic body advising the government on economic policy, on Wednesday downgraded its growth forecast for Germany’s economy, now expecting stagnation in 2025. This revision follows earlier forecasts that had predicted moderate growth, reflecting persistent industrial weakness and external risks.
Germany, Europe’s largest economy and the only G7 member to have experienced no growth in recent years, continues to face fiscal constraints and an industrial downturn that have dampened its economic prospects. Tariffs imposed by the United States remain a significant challenge for Germany’s export-oriented economy.
Monika Schnitzer, chairwoman of the Council, emphasized that Germany’s near-term economic outlook is heavily influenced by U.S. tariff policies and the country’s fiscal package. The U.S. remains Germany’s largest trading partner, with bilateral goods trade totaling 253 billion euros ($284 billion) in 2024.
On the positive side, Germany approved a major fiscal plan in March 2024, which includes a 500-billion euro special fund for infrastructure investments and relaxes borrowing limits on defense spending. Economists see this fiscal stimulus as a key factor that could help Germany return to growth.
The Council forecasts that starting in 2026, the fiscal stimulus will spur investments in construction, equipment, and government spending, leading to a projected 1.0% growth next year. Private consumption is also expected to strengthen in 2026 as real disposable incomes increase more significantly than in 2025, supporting broader economic recovery.
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