The European Commission said that the German economy will continue to significantly underperform average growth in the euro zone until 2026, as high uncertainty puts pressure on consumption and investment, and trade prospects have worsened due to weakening global demand for manufactured goods.
Now the European Commission expects the German economy to contract by 0.1% this year (previous forecast: +0.1%). Germany has lagged the European Union average since 2021 and given the latest forecasts, this will make it the worst performer among the Group of Seven rich democracies.
As for 2025, the European Commission has lowered its forecast for GDP growth by 0.3%, to 0.7%. Meanwhile, in 2026, German GDP growth is projected to accelerate to 1.3%, but it will still be below the eurozone average of 1.6%. Overall, domestic demand is forecast to become the main driver of economic growth again in 2025 and 2026
The European Commission also said that harmonized German inflation is likely to average 2.4% this year, and then decline to 2.1% in 2025 and 1.9% in 2026.