FRANKFURT, June 6 (Reuters) – The Bundesbank has stated that Germany’s economic growth will remain subdued this year and that increased government spending will not significantly impact growth until the end of 2027. Germany, once Europe’s economic powerhouse, is facing ongoing structural challenges that have led to stagnation or contraction for three consecutive years. While the new government’s plans to boost spending on infrastructure and defense are expected to support long-term growth, the economy remains under pressure due to global trade tensions. “The new U.S. tariffs and uncertainty about future U.S. policy are dampening economic growth,” said Bundesbank President Joachim Nagel. Exports are projected to decline sharply this year, with only a slight recovery expected by 2026. The industrial sector, which has been in a multi-year recession, continues to struggle due to high energy costs and competition from Asia. The Bundesbank forecasts that Germany’s economy will remain stagnant this year, with growth reaching just 0.7% next year. Inflation is expected to ease to 2.2% this year and fall below the European Central Bank’s 2% target in 2026 and 2027. By the end of 2027, increased government spending is expected to significantly boost GDP growth.
— new from Reuters