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German central bank slashes growth outlook for 2025, 2026

December 13, 2024

Germany's Bundesbank has drastically trimmed its economic forecasts for the next two years, citing persistent economic woes and structural issues. Separately, there was also grim news about Germany's exports.

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Germany Kuka robots in the Porsche plant in Leipzig
Germany's economic forecast has been downgraded with industry facing various economic obstaclesImage: picture alliance/dpa/J. Woitas

The German Bundesbank on Friday said the sluggish growth of the German economy would last significantly longer than it had previously assumed, cutting its economic forecasts for 2025 and 2026.

It comes as Europe's largest economy faces multiple headwinds.

How the outlook has changed

The country's central bank forecast that output would grow a mere 0.2% in 2025, down from a June forecast of 1.1%.

It also predicted growth of 0.8% for 2026, well down on the previously expected 1.4%.

The forecast is even more pessimistic for the current year, with the Bundesbank expecting German economic output to decline by 0.2% in 2024. In June, the bank had foreseen a 0.3% increase in real gross domestic product (GDP).

"The German economy is not only battling with persistent economic headwinds, but also with structural problems," explained Bundesbank President Joachim Nagel on Friday.

Germany's economic dilemma: spend or save?

The issues primarily affect industry and exports, as well as investment, he said.

Private consumption will increase steadily, Nagel said, but not as much as previously expected — partly because of the increasing nervousness about the labor market.

Exports in the doldrums

There was further bad news for exporters on Friday, even ahead of US President-elect Donald Trump's return to the White House and his threats of widespread tariffs.

In October, German companies shipped significantly fewer goods abroad with exports shrinking by 2.8% compared to September, according to the German Federal Statistical Office, at a value of €124.6 billion.

The decline was the sharpest of the current year. Compared to the same month last year, exports also fell by 2.8%.

According to the Bundesbank, exports will only pick up gradually.

"The biggest uncertainty factor for the forecast at the moment is a possible increase in protectionism globally," warned Nagel.

rc/zc (dpa, AFP)