Central Bank Indicates Germany Is Facing Economic Stagnation
The latest monthly report from Bundesbank indicates that the Eurozone's largest economy is poised for further decline. Read Full Article at RT.com
TroibNews 
Germany's central bank has significantly revised its growth projections for the country's economy, now forecasting a contraction this year and minimal growth in 2025, as deep-seated structural challenges persist.
In its monthly report released on Friday, the Bundesbank indicated that GDP is expected to decrease by 0.2% this year, reflecting a notable downgrade from an earlier estimate of a 0.3% expansion. This revision is attributed primarily to ongoing weakness in the industrial sector.
The report highlights that the current issues in the industrial sector are largely seen as structural, creating pressures on export activities and investments. The labor market is also being impacted, which has repercussions for private consumption.
“Against this backdrop, the German economy is set to stagnate in the winter half-year 2024-25 and only begins to make a slow recovery over the course of 2025,” the Bundesbank stated.
Next year, output is projected to rise by 0.2%, a significant drop from the previously expected 1.1%. The bank anticipates growth of 0.8% and 0.9% for 2026 and 2027, respectively.
“The German economy is struggling not just with persistent cyclical headwinds but also with structural problems,” noted Bundesbank President Joachim Nagel in the report. He pointed to uncertainties related to geopolitical conflicts and the potential impacts of structural changes and future fiscal and economic policies following the Bundestag elections in February. “All in all, the prevailing risks at present are of even weaker economic growth and higher inflation,” Nagel added.
The report also advised that industrial firms in Germany must adapt to the longer-term effects of the energy price crisis stemming from the Ukraine conflict, alongside the demands of the green transition and demographic shifts, among other ongoing challenges.
Furthermore, the Bundesbank cautioned that a possible trade war with the U.S. could lead the German economy into recession. If President-elect Donald Trump acts on his proposal to impose broad tariffs on all imports to the U.S., this could lead to a reduction of between 0.2 and 0.6 percentage points in German GDP next year.
In recent years, Germany, the Eurozone's largest economy, has lagged behind its counterparts, largely due to a sustained downturn in manufacturing. Notably, it was the only member of the Group of Seven economies to experience a contraction in 2023.
Max Fischer for TROIB News
In its monthly report released on Friday, the Bundesbank indicated that GDP is expected to decrease by 0.2% this year, reflecting a notable downgrade from an earlier estimate of a 0.3% expansion. This revision is attributed primarily to ongoing weakness in the industrial sector.
The report highlights that the current issues in the industrial sector are largely seen as structural, creating pressures on export activities and investments. The labor market is also being impacted, which has repercussions for private consumption.
“Against this backdrop, the German economy is set to stagnate in the winter half-year 2024-25 and only begins to make a slow recovery over the course of 2025,” the Bundesbank stated.
Next year, output is projected to rise by 0.2%, a significant drop from the previously expected 1.1%. The bank anticipates growth of 0.8% and 0.9% for 2026 and 2027, respectively.
“The German economy is struggling not just with persistent cyclical headwinds but also with structural problems,” noted Bundesbank President Joachim Nagel in the report. He pointed to uncertainties related to geopolitical conflicts and the potential impacts of structural changes and future fiscal and economic policies following the Bundestag elections in February. “All in all, the prevailing risks at present are of even weaker economic growth and higher inflation,” Nagel added.
The report also advised that industrial firms in Germany must adapt to the longer-term effects of the energy price crisis stemming from the Ukraine conflict, alongside the demands of the green transition and demographic shifts, among other ongoing challenges.
Furthermore, the Bundesbank cautioned that a possible trade war with the U.S. could lead the German economy into recession. If President-elect Donald Trump acts on his proposal to impose broad tariffs on all imports to the U.S., this could lead to a reduction of between 0.2 and 0.6 percentage points in German GDP next year.
In recent years, Germany, the Eurozone's largest economy, has lagged behind its counterparts, largely due to a sustained downturn in manufacturing. Notably, it was the only member of the Group of Seven economies to experience a contraction in 2023.
Max Fischer for TROIB News
