German Economy Faces Stagnation With No Recovery in Sight, Council of Economic Experts Warns
Germany's Council of Economic Experts has sharply downgraded growth forecasts, now expecting just 0.5% GDP growth in 2025 and 0.8% in 2026, with inflation projected to reach 3% by 2026. The downturn is driven by multiple factors including rising energy prices following the Iran conflict, U.S. tariff policies, Chinese export competition, and structural demographic challenges. The grim outlook contradicts Chancellor Friedrich Merz's May 2025 pledge to quickly revive the economy and signals deepening challenges for Germany's export-dependent industrial sector.
Germany's independent Council of Economic Experts delivered a stark assessment to Chancellor Friedrich Merz and his cabinet on May 27, significantly lowering economic growth forecasts to 0.5% for 2025 and 0.8% for 2026, with inflation expected to climb to 3% by 2026. The deterioration reflects multiple concurrent pressures: energy prices have surged 40% for heating oil following the Iran conflict, disrupting global oil and gas supplies; U.S. tariff policies are constraining trade; and Chinese competitors are aggressively expanding exports to Europe, Germany's crucial market. Business leaders report that Germany's competitive position is at its weakest since World War II, with one in four German jobs tied to the industrial sector now at risk. Beyond cyclical economic factors, Germany faces structural headwinds including rapid population aging as baby boomers retire, declining birth rates, rising life expectancy, and reduced immigration—all pressuring future growth and fiscal sustainability. The forecast directly contradicts Chancellor Merz's stated priority upon taking office to restore economic momentum.
What's missing
The article does not detail specific policy responses or stimulus measures the German government is considering to address the forecast, nor does it provide comparative context on how other major European economies are performing under similar pressures.
What different sources said
- Deutsche WelleCenter
Germany: No recovery in sight for the economy
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