Bundesbank Issues Warnings on Economic Growth in Germany for 2025
According to the latest forecasts from the Bundesbank, growth expectations for Germany’s economy in 2025 will be quite limited. The gross domestic product (GDP) in Germany is expected to decline by 0.2% in 2024, while only a 0.2% increase is anticipated for 2025. These forecasts reflect significant downward revisions from the previous June expectation of a 0.3% growth and the projected growth rate of 1.1% for 2025.
Bundesbank President Joachim Nagel emphasized that the German economy is struggling with persistent economic headwinds and structural issues. He particularly noted that the labor market has also become sensitive to weaknesses in economic activity. The prolonged challenges faced by Germany’s industrial and automotive giants, coupled with upcoming elections, paint a bleak picture for Europe’s largest economy.
Economic risks and political influences The Bundesbank forecasts an economic downturn during the upcoming winter months, with a gradual recovery expected to begin next year. Growth rates of 0.8% and 0.9% are anticipated for 2026 and 2027, respectively. However, risks stemming from Donald Trump’s policies pose a downside threat. Germany’s strong dependency on exports creates sensitivity to declines in foreign demand resulting from global trade losses.
According to the report, should there be a change in U.S. policies, economic output in 2027 could be 1.3% to 1.4% lower than the baseline scenario. Various models suggest that a trade conflict could cause the German GDP to stagnate or shrink in 2025. Nagel had previously warned that Trump’s tariffs could lead to another GDP contraction in 2025.
Inflation expectations are positive On the inflation front, the Bundesbank has revised its June forecasts downward. Consumer prices are expected to slightly decrease from 2.5% to 2.4% in 2025. However, inflation is projected to gradually return to around 2% in the coming years.
Nagel cited two main factors explaining this situation: past monetary policy tightening and the reduction of price pressures arising from labor costs. Under these economic and inflationary pressures, Germany is likely to continue to be affected by both domestic and external factors.