Germany’s central bank on Friday sharply downgraded its growth forecasts for next year and 2026, predicting a prolonged period of weakness for Europe’s biggest economy as it battles multiple headwinds.
From a manufacturing slowdown and weak export demand to heightened political uncertainty at home and the risk of renewed trade tensions under US President-elect Donald Trump, the German economy is facing a perfect storm.
The Bundesbank forecast output will grow a meagre 0.2 percent in 2025, down from a forecast in June of a 1.1 percent expansion. For 2026 it forecast growth of 0.8 percent, down from a 1.4 expansion expected previously.
The estimates are substantially worse than the last projections from the government released in October, and will ring alarm bells among policymakers who had hoped for a strong rebound starting next year.
“The German economy is not only struggling with persistent economic headwinds, but also with structural problems,” …