The Ifo Institute, one of Germany's largest economic think-tanks, said that if the German economy fails to overcome structural problems next year, then GDP growth will be only 0.4%. However, if the right course of economic policy is chosen, then the economy can expand by 1.1%. The Ifo Institute had forecast 0.9% growth in its September forecasts.
Regarding the inflation outlook, the Ifo Institute predicts that CPI growth will be 2.3% in 2025 and 2% in 2026.
"At the moment, it is not yet clear whether the current phase of stagnation is a temporary weakness or a permanent and therefore painful change in the economy. Tight monetary policy in Europe and in many German export markets has contributed to a decline in industrial orders, which is putting pressure on the economy. However, purchasing power has returned, and inflationary pressures in Germany will also continue to weaken," the Ifo Institute said.
Meanwhile, today the IfW Kiel Institute for the World Economy sharply lowered its forecast for the German economy for 2025 - to 0% from +0.5%, expected in September. The GDP growth forecast for 2026 was also worsened - by 0.2%, to 0.9%.
"The German economy cannot break free from stagnation. There are hardly any signs of a noticeable economic recovery," the economic institute warned.