Key information
- Germany’s GDP is expected to stagnate in the winter half and begin to slowly recover in 2025.
- The Bundesbank forecasts a 0.2 percent decline in real GDP this year and slight growth of 0.2 percent next year, followed by stronger growth of 0.8 percent and 0.9 percent in 2026 and 2027 respectively.
- Private consumption will continue to grow, but with reduced dynamism due to the cooling of the labor market and the reduction in wage growth.
The German economy faces persistent challenges that impact industrial production, exports, investments and the labor market. This situation has led to a slowdown in private consumption, which is no longer a driver of economic recovery. As a result, Germany’s GDP is expected to stagnate during the winter half-year, before experiencing a slow recovery from 2025.
The Bundesbank forecasts a decline of 0.2 percent in real GDP this year and slight growth of 0.2 percent next year. However, stronger growth of 0.8 percent and 0.9 percent is expected in 2026 and 2027 respectively. Forecasts call for a gradual rebound in export activity and a possible increase in business investment after some delay.
Impact on private consumption
Although private consumption continues to grow, it is less dynamic than expected due to a cooling labor market and reduced wage growth. As a result, consumer spending will initially see only marginal increases.
Overall, the economic outlook has been significantly downgraded from previous forecasts. Despite weak economic activity, inflation measured by the harmonized consumer price index (HICP) is expected to decline slightly in 2025, from 2.5 percent to 2.4 percent. This development is attributed to a temporary increase in food prices and persistent pressures on service prices.
Projections d’inflation
However, from 2026, inflation in Germany is expected to gradually decline to 2 percent, driven by earlier monetary policy tightening and easing of price pressures linked to labor costs. ‘artwork. Excluding energy and food, core inflation is expected to rise from 3.3 percent this year to 2.4 percent next year, then to 1.9 percent in 2026. In 2027, the inflation rate of base is expected to rise slightly with the economic recovery, reaching 2.0 percent.
The public deficit ratio is expected to decline slightly, from 2.6 percent in 2023 to 2.4 percent in 2027, partly thanks to the expiration of aid measures linked to the energy crisis. However, increased spending on Social Security, interest payments and defense is expected to offset some of this reduction. Therefore, the debt ratio will fall to 61.7 percent in 2027, from 62.9 percent in 2023.
Uncertainties and risks
Despite these projections, several uncertainties remain. A potential rise in global protectionism, ongoing geopolitical conflicts, the impact of structural changes and the direction of future fiscal and economic policies after the Bundestag elections present significant risks. These factors could lead to even weaker economic growth and higher inflation than expected.
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