Germany's Council of Economic Experts has revised down its growth forecast for the nation's economy, citing the ongoing conflict in the Middle East, rising energy costs, and the impact of U.S. trade policies. The council, which presented its spring report to the government, now projects the German economy to expand by 0.5% this year, a reduction from the 0.9% growth anticipated last November. Growth for 2027 is also adjusted to 0.8%.
This revision follows a similar move by Germany's Federal Ministry for Economic Affairs in April, which lowered growth expectations for 2026 and 2027 while raising inflation forecasts. The government now expects the economy to grow 0.5% in 2026, down from a previous estimate of 1.0%, and has revised the 2027 growth forecast from 1.3% to 0.9%.
Economists point to elevated energy prices as a key factor eroding household purchasing power and consequently suppressing consumer spending.
Inflation is projected to average 3.0% in 2026, up from 2.2% in 2025, before easing slightly to 2.8% in 2027.
The expert panel also outlined a risk scenario: should international oil prices rise to $120 per barrel and remain elevated until October 2026, German economic growth could slow to 0.2% in 2026 and 0.5% in 2027. Under this scenario, inflation would climb to 3.5% in 2026 and remain at 3.2% in 2027.
Germany's traditional external economic advantages are weakening. Council member Gabriel Felbermayr noted that the current account surplus as a share of GDP is expected to decline significantly, from nearly 6% in 2024 to around 3% by 2027.
Felbermayr highlighted that competition from Chinese suppliers has become increasingly pronounced in Germany's traditional export sectors, such as mechanical engineering. "This is putting immense pressure on domestic industries, both within Germany and in third markets," he stated.
The council warned that Germany's prolonged economic weakness stems from several structural issues, including declining industrial competitiveness and demographic pressures.
"Germany's economic sluggishness has persisted for seven years. This is not merely a cyclical issue but stems from deep-seated structural contradictions," said council member Veronika Grimm.
Economists are urging Germany to implement more reforms to adapt to future challenges, with a focus on reducing social welfare expenditures and expanding the labor force.
Monika Schnitzer, Chair of the German Council of Economic Experts, emphasized at the report's presentation on Wednesday that the pressure for reform is now immense.
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