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Germany has Europe's biggest economy, but hasn't seen
significant economic growth in five years and the gross domestic
product shrank in each of the last two years.
The advisory panel, in its first forecast since new Chancellor
Friedrich Merz's government took office earlier this month,
predicted the economy will stagnate this year and grow by 1% in
2026. Its previous forecast, in November, was for 0.4% growth
this year.
The new outlook is in line with the forecast made a month ago by
Germany's last government.
Merz, who took office on May 6, has pledged to roll back
bureaucracy, advance digitization, provide tax breaks for
companies and promote more European trade agreements.
“Trump's tariff policy is increasing uncertainty and endangering
economic growth worldwide,” said Monika Schnitzer, the head of
the panel. But she said that a huge investment package put
together by Merz's coalition “offers opportunities for a
modernization of infrastructure in Germany and a return to a
higher path of growth,” meaning a better outlook for next year.
Germany for years expanded exports and dominated world trade in
engineered products such as industrial machinery and luxury
cars. But it has suffered from increasing competition from
Chinese companies, along with many other factors, and Trump's
tariffs have added a further risk to German exports.
Last year, the United States was Germany’s biggest single
trading partner for the first time since 2015, displacing China
from the top spot as exports to the Asian power declined.
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