Germany's Economic Stagnation: Challenges and Opportunities

The German Council of Economic Experts has adjusted its expectations for the nation's economic growth, now predicting stagnation amid a challenging environment marked by US trade policies and industrial decline. Previously, the council had forecast a modest growth of 0.4% for the year.

Germany remains the weakest performer among the G7 advanced economies, attributed to stringent fiscal policies and a sagging industrial sector. US tariffs, imposed by President Donald Trump, pose significant threats due to their impact on Germany's export-driven economy. Monika Schnitzer, chairwoman of the council, emphasized the influence of US tariffs and domestic fiscal strategies on Germany's economic outlook.

On a positive note, a newly approved fiscal plan aims to rejuvenate the economy with substantial infrastructure investments, separate from defense borrowing caps. This package is anticipated to fuel growth starting in 2026 by enhancing investments across various sectors. Inflation is concurrently projected to gradually align with healthier levels, though trade tensions and fiscal adjustments present variables impacting future economic stability.

(With inputs from agencies.)