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The German economy continues showing weakness
POSITIVE FACTORS
German GDP will achieve positive growth from Q1-25 onwards but will continue to lag relative to the rest of the Eurozone in the coming years.
Private consumption shows signs of expansion as investment and exports begin to recover.
Despite a recent uptick, inflation will remain subdued throughout 2025 and 2026.
The general government deficit is expected to reach 0,8% of GDP in 2026, with total debt standing at 61,4% (around 0,7% less than the 2021 record).
CHALLENGES
Contractions in industrial production and PMIs point to continued weakness in German manufacturing.
Structural factors: demographic shifts will reduce future labor supply.
Uncertainty surrounding geopolitics and the Trump Administration’s tariff policy are potential downside risks.