German Council Forecasts 2025 Economic Stagnation Amid Trade, Fiscal Challenges

The German Council of Economic Experts has downgraded Germany's economic forecast for 2025 to stagnation, revising down from an earlier expectation of 0.4% growth. Germany remains the only G7 country facing stagnation, challenged by a weakening industrial sector and the impact of U.S. tariffs on its export-driven economy. Chairwoman Monika Schnitzer highlighted that U.S. tariff policies and domestic fiscal measures are critical factors shaping the near-term outlook. However, Germany's government has approved a €500 billion infrastructure fund, expected to stimulate growth starting in 2026, with GDP projected to rise by 1% that year. The fiscal package also includes measures to increase private consumption through higher disposable incomes and eases borrowing caps on defense investments. Despite short-term challenges, the investment plan offers a path toward economic recovery in the medium term.