German economy to see nil growth in 2025, 1% growth in 2026: GCEE
The German economy, which is still in a phase of 'pronounced weakness', is expected to stagnate this year and grow by only 1 per cent in 2026, according to the German Council of Economic Experts, an independent academic body that advises on economic policy issues.
Bureaucratic requirements and long approval procedures are slowing down overall economic growth.
Germany's economy, in 'pronounced weakness', is expected to stagnate this year and grow by 1 per cent in 2026, the German Council of Economic Experts said. Bureaucratic needs and long approval procedures are slowing down growth. Average CPI inflation is likely to be 2.1 per cent in 2025 and fall to 2 per cent in 2026. US trade policy places an additional burden on the already weak German exports.
If funds from the recently-announced fiscal package are spent on additional investment, this will modernise the country's infrastructure and increase growth in the medium term, it noted.
Debt-financing public consumption should be avoided, and institutional precautions should be taken to ensure investment-orientated use of the funds, it cautioned in its Spring Report 2025.
Unnecessary bureaucracy should be reduced more consistently than in the past in order to relieve the burden on companies.
'In the near future, the German economy will be significantly influenced by two factors: US trade policy and the fiscal package,' explained GCEE chair Monika Schnitzer.
'US trade policy places an additional burden on the already weak German exports. With a sharp and unpredictable rise in tariffs, German exports are likely to decline even further,' she noted.
Consumer price inflation is expected to be 2.1 per cent on an average in 2025 and fall slightly to 2 per cent in 2026.
'Although markets anticipate interest rate cuts, the inflation outlook remains highly uncertain. For instance, it is unclear whether ongoing trade conflicts will fuel or dampen inflation. In addition, expansionary fiscal policies in Germany could raise inflation expectations, potentially prompting the ECB to favour a more restrictive monetary policy stance,' explained Veronika Grimm, council member .
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