The Bundesbank sharply worsened its forecast for the German economy in 2025, noting the inherent uncertainty associated especially with the potential for trade protectionism to increase.
According to the German Central Bank's new forecast, the country's gross domestic product (GDP) will grow by just 0.2% in 2025. In June, it was expected to grow by 1.1%.
The Bundesbank predicts a decline in the German economy in 2024. with 0.2%, which means an economic recession for the entire current year. While earlier growth of 0.3% was expected. If this forecast is correct, the decline will be recorded for the second year in a row.
"The German economy is not only facing persistent economic challenges, but also structural problems", said Bundesbank President Joachim Hagel.
The structural problems mainly affect the industrial sector, exports and investment, he said.
Hagel also warned that trade protectionism and geopolitical conflicts could suppress economic growth and cause higher inflation. "&P;The main source of uncertainty in our forecasts is the possible strengthening of global protectionism", he said.
As a major exporter, Germany - which is one of the largest economies in Europe and the third largest in the world - could be severely affected by a possible increase in tariffs on US imports, promised since the new election. President Donald Trump, writes The Wall Street Journal.
This could further weaken Germany's industrial sector, which has not yet reached pre-pandemic production levels. This is mainly due to the loss of access to cheap gas due to the conflict between Russia and Ukraine, the weakening of global demand, as well as the decline in consumer confidence in the country.
According to the new forecast of the Bundesbank, Germany's B&P will fall by 0.8% in 2026 and by 0.9% in 2027.