After a long barren spell, the planned fiscal boost provides the prospect of an upswing next year. In our current spring forecast, we anticipate that Germany’s gross domestic product will stagnate in 2025 but grow by 1.0% in 2026. In addition to a stabilisation of exports, significant growth impetus is likely to come from government investment in particular in 2026. In the current year, however, investments are likely to remain weak, while exports will fall again in light of the increased US tariffs. We expect euro area GDP to grow by 0.8% in 2025 and by 1.0% in 2026. The persistent services inflation contrasts with falling energy prices and disinflationary effects coming from US tariff policy. We have lowered our inflation forecasts (HICP) for 2025 to 2.0% in the euro area and 2.1% in Germany.

KfW Business Cycle Compass May 2025(PDF, 196 KB, accessible)

Further information about the KfW Business Cycle Compass

Press release