German central bank slashes growth outlook for 2025, 2026

Germany's Bundesbank has significantly downgraded its economic forecasts for 2025 and 2026, citing ongoing economic difficulties and structural issues that continue to hinder the nation's growth.

The new projections were released on December 13, signaling a prolonged period of sluggish economic activity for Europe's largest economy, Caliber.Az reports per foreign media.

The German central bank now predicts a mere 0.2 per cent growth in GDP for 2025, a sharp reduction from the 1.1 per cent growth previously forecast in June. For 2026, the bank expects growth of just 0.8 per cent, down from the earlier forecast of 1.4 per cent.

The outlook for the current year is even more bleak, with the Bundesbank forecasting a 0.2 per cent contraction in Germany's GDP for 2024, in stark contrast to the 0.3 per cent growth previously expected. This marks the second consecutive year of economic stagnation for Germany.

Bundesbank President Joachim Nagel explained that the German economy is grappling with both persistent economic headwinds and significant structural issues. These challenges are particularly affecting the industrial sector, exports, and investment. While private consumption is expected to increase steadily, it will not rise as much as initially anticipated, partly due to growing concerns over the labor market.

There was further bad news for German exporters. The latest data from the German Federal Statistical Office revealed a sharp decline in exports in October, with a 2.8 per cent drop compared to September, amounting to €124.6 billion. This marked the steepest decline of the year, and exports were also down by 2.8 per cent compared to the same month last year.

The Bundesbank anticipates that exports will only see a gradual recovery in the coming months. Nagel further warned that the biggest uncertainty for Germany's economic outlook is the potential rise in global protectionism, which could dampen international trade and further strain the economy.

By Vafa Guliyeva