Central Bank Warns of 2025 Stagnation Amid Germany’s Economic Slowdown
“The new US tariffs and uncertainty about future US policy are initially dampening economic growth,” Bundesbank President Joachim Nagel said.
“This is hitting German industry at a time when it was beginning to stabilize after a long period of weakness,” he said.
With new figures from the Federal Statistical Office showing a dip in German exports in April, the Bundesbank expects a significant decline in exports for the current year due to US trade policy, with little improvement in sight for 2026.
The euro’s appreciation against the dollar – which makes products from companies in the eurozone more expensive on world markets – is also weakening the competitiveness of German exporters at a time of growing competition from China.
This is expected to delay the German economy’s recovery until the government’s planned multi-billion investments in defence and infrastructure provide a boost.
READ ALSO: MTN Ghana Launches 2025 Edition of 21 Days of Y’ello Care
The Bundesbank expects real GDP to grow by 0.7% in 2026, slightly below its forecast of 0.8% in December. Meanwhile, it has raised its expectations for 2027 from 0.9% to 1.2%.
But the uncertain course of US President Donald Trump’s trade policy looms over the forecasts. A tightening of US trade policy and a renewed shock to confidence in the US economy and the dollar would, in the Bundesbank’s view, pose a considerable risk to Germany’s expected recovery.
In more positive news, the bank’s figures showed that inflation is slowing down. It expects an inflation rate of 2.2% for 2025, calculated using the EU standard Harmonized Index of Consumer Prices (HICP), and of 1.5% for 2026.
From 2026 onwards, the core rate, which excludes volatile energy and food prices, is also likely to stabilize at around 2%, according to the central bank.
By Jörn Bender, dpa
