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Bundesbank warns: German economy is at risk of stagnation!
The Bundesbank forecasts stagnating GDP for 2025 and warns of risks from US tariffs for the German economy.
Bundesbank warns: German economy is at risk of stagnation!
In a current analysis of the situation in the German economy, the German Bundesbank announced an alarming stagnation in gross domestic product (GDP) for the second quarter of 2025. This assessment follows modest growth of 0.4 percent in the first quarter, which was primarily due to pull-forward effects. Companies have brought forward orders in recent months to avoid possible economic impacts due to US tariffs.
However, the hoped-for positive impulses have largely fizzled out, and the Bundesbank is warning of “additional headwinds” for the export-oriented German economy. EOS President Donald Trump is threatening new tariffs of up to 30 percent on EU imports if an agreement is not reached with Brussels by the beginning of August. Such a scenario would represent a “significant downside economic risk” – that is, the export economy could suffer severe losses.
Weak economic dynamics
In direct connection with this, the basic trend in the German economy remains weak. Improvements, such as the bright spots in the Ifo business climate, are often only a short-term effect, which can mainly be attributed to billions in investments by the federal government. Unfortunately, the long-term impact of these investments remains limited. Industrial production is also weak and the construction industry is struggling with significant crises. Consumers are feeling insecure and tend to save, which further dampens overall economic momentum.
The labor market, on the other hand, remains stable, which at least sheds some light on the gloomy forecast. Nevertheless, the Bundesbank expects that 2025 will be another year without economic growth.
Development of the inflation rate
The Bundesbank expects the inflation rate to fluctuate around 2 percent in the coming months, heavily dependent on the development of oil prices and the euro exchange rate. Energy prices are expected to fall less sharply than in the first half of 2025.
Overall, the economic assessment remains a challenge for monetary policy in Germany and Europe. The forecasts from the Bundesbank, which regularly analyzes important economic indicators, show how crucial it is to keep an eye on future developments. Again Bundesbank compiled, these assessments are based on a variety of factors that also have a significant influence on monetary policy.