The German economy will continue to "stagnate" in 2025 - According to the Bundesbank, Trump's policies endanger domestic exports
Germany's economy is unlikely to grow in 2025 after contracting this year, according to new forecasts from the Bundesbank. Gross domestic product will fall by 0.2% in 2024, he said, downgrading a June forecast of 0.3% growth. Output will expand by just 0.2% in 2025, instead of the 1.1% previously estimated, and could even fall if US trade tariffs materialize.
"The German economy is not only struggling with ongoing economic pressures, but also with structural problems," said Bundesbank President Joachim Nagel, highlighting the industrial sector in particular. "The labor market is also now clearly responding to the prolonged weakness in economic activity."
The forecasts worsen an already bleak outlook for Europe's biggest economy, as the industrial and car giants' woes are compounded by political turmoil ahead of snap elections in February, as well as risks looming after Donald Trump's return to the White House. .
The Bundesbank expects the economy to stagnate this winter and begin a slow recovery over the next year. For 2026 and 2027, it predicts growth of 0.8% and 0.9%.
However, the main risks come especially from Trump's policies. "Germany's strong reliance on exports makes it particularly vulnerable to falling foreign demand resulting from restrictive trade policies," the Bundesbank said.
Overall, economic output in 2027 could be 1.3%-1.4% below the baseline scenario due to a change in US policy, the report said. According to various models, a trade conflict could even cause German GDP to stagnate or shrink in 2025.
Regarding inflation, the Bundesbank revised downwards its outlook from June. The bank expects consumer price growth to remain high in 2025, easing slightly to 2.4% from 2.5%. However, in the coming years, inflation will gradually return to 2%.
"There are two main factors at work here: the earlier tightening of monetary policy and the easing of price pressure from labor costs," Nagel said.
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