MercoPress. South Atlantic News Agency

Two tough low growth years ahead for Germany, indicates the Bundesbank

“The German economy is not only battling with persistent economic headwinds, but also with structural problems,” explained Bundesbank President Joachim Nagel (Pic FT)

The German central bank, Bundesbank, drastically trimmed the economic forecast for Germany in the next two years, 2025 and 2026, given structural issues, including German industry facing significant economic obstacles and with grim prospects for the country’s exports.

Germany remains Europe’s largest and in normal times the most dynamic and locomotive for the rest of the EU. But the Bundesbank has 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.

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.

There was further bad news for exporters last week, even ahead of US president-elect Donald Trump return to the White House and his threats of widespread tariffs and withdrawing from NATO

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.