Steady as She Goes? German Economy on the Ropes with a Potential Zero-Growth Year Ahead, Says Bundesbank
Anticipated Stagnation of Germany's GDP in 2025 Forecasted - German economic growth forecast for 2025 remains stagnant as per Bundesbank's assessment
Hey there! Got some hot news for you today. Germany's central bank, the Bundesbank, has dropped a bombshell prediction - they expect the German economy to experience zero growth in 2025. Gasp!
Market heavyweight Jens Weidmann (Bundesbank president) spilled the tea during a press conference, stating that this zero-growth year is happening at a particularly sensitive time when the German industry was finally finding its footing after a grueling weak stretch. Oof.
But fear not, because there's a silver lining. According to the Bundesbank, the German government's escalating defense and infrastructure spending is expected to kick-start a noticeable increase in demand and GDP growth starting in 2026. So, worry not, the storm may pass sooner than you think!
After 2025, bundles of good news await, with the bank projecting a modest recovery: the gross domestic product (GDP) is expected to grow by 0.7 percent in 2026 and by 1.2 percent in 2027. Woohoo! In fact, the bank has even revised its forecast upward for 2027, predicting a slightly stronger growth of 1.2 percent (compared to its previous estimate of 0.9 percent).
According to Weidmann, inflation is expected to take a nosedive this year, falling to a mere 2.2 percent. In 2026, the consumer price index will slow further to 1.5 percent, before rebounding again in 2027, reaching 1.9 percent. Phew, that's a relief for consumers and the economy. The Bundesbank's target inflation rate is a steady two percent.
But wait, there's more! The bank is sending out a heads-up that the current uncertainty is through the roof, and it could lead to economic growth and inflation swings in both directions. Yikes! If tensions with the US escalate and EU products face 20 percent tariffs, followed by retaliatory measures from the EU, Germany could suffer another two years of recession, with the GDP declining by 0.5 percent in 2025 and 0.2 percent in 2026.
[1] Bundesbank's Report on the German Economy[2] German Export Association Analysis[3] Institute for Economic Research (Ifo) Forecast[4] German Chamber of Commerce Forecast
The Federal Bank of Germany is forecasting that, by 2025, the German economy will be on a path of zero growth, but with escalating defense and infrastructure spending, the bank anticipates a noticeable increase in demand and GDP growth starting in 2026. In the realm of finance and business, this potential recovery is encouraging news for Germany's economy.
