Bundesbank: German Economy Projected to Slowly Recover

7 June 2024

By Isabel Teles – FRANKFURT (Econostream) – After two years of weakness, the German economy is projected to slowly recover in 2024 and to strengthen in 2025 and 2026, the German Bundesbank said on Friday in its latest semi-annual forecasts.

‘The forecast for Germany expects German gross domestic product (GDP) to grow again somewhat this year and then increase more strongly in the following years’, the Bundesbank said in a press release.

Calendar-adjusted real GDP would increase 0.3% this year, the report said. The Bundesbank projected 1.1% economic growth for 2025 and 1.4% for 2026, which, confirming the December 2023 forecasts.

The recovery would benefit from a pickup in private consumption and exports and stronger industrial growth, the report said.

The inflation forecast for 2024 was revised slightly upwards from the December 2023 forecast, from 2.7% to 2.8%.

Headline inflation was expected to decline from 2.8% in 2024 to 2.7% in 2025 and to 2.2% in 2026, the Bundesbank said, while core inflation was expected to fall to 3.1% in 2024, to 2.5% in 2025 and to 2.3% in 2026.

‘Energy and food price inflation in particular is likely to ease considerably this year’, the report said. ‘However, inflation is proving to be stubborn, especially in the case of services, where strong wage growth and the resulting cost pressures are major factors.’

According to the report, German public finances would improve, with the government deficit ratio shrinking to 1.1% in 2026 from 2.5% in 2023. ‘The debt ratio is expected to fall to somewhat more than 60% by 2026’, the Bundesbank said.