{"id":443499,"date":"2026-01-28T18:56:07","date_gmt":"2026-01-28T18:56:07","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/443499\/"},"modified":"2026-01-28T18:56:07","modified_gmt":"2026-01-28T18:56:07","slug":"germany-cuts-growth-forecasts-amid-slow-recovery","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/443499\/","title":{"rendered":"Germany cuts growth forecasts amid slow recovery"},"content":{"rendered":"

Stay informed with free updates<\/p>\n

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The German government has cut its GDP forecasts for the next two years as Europe\u2019s largest economy struggles to rebound from a prolonged period without real growth.<\/p>\n

In its latest economic outlook published on Wednesday, the Federal Ministry for Economics predicted that Germany\u2019s GDP would expand by 1 per cent in real terms this year, down from a previous forecast in October of 1.3 per cent. <\/p>\n

For 2027, it is predicting 1.3 per cent growth, compared with its October forecast of 1.4 per cent. <\/p>\n

The downgrade will add to fears about the strength of Germany\u2019s recovery, despite the government\u2019s \u20ac1tn debt-funded investment spree to bolster infrastructure and defence over the next decade.<\/p>\n

\u201cConcern is rising whether more expansionary fiscal policy in Germany will be enough to turn sentiment around in the structurally weak economy,\u201d said economists from SEB bank.<\/p>\n

Economy minister Katherina Reiche acknowledged on Wednesday that \u201cthe expected fiscal policy stimulus did not materialise quite as quickly, nor to the extent, as we had assumed\u201d.<\/p>\n

However, she argued there was growing evidence of progress, as she pointed to improvements in industrial production and rising order intake. \u201cThere is a realistic chance that the country is on a\u00a0modest recovery path\u00a0after years of stagnation.\u201d<\/p>\n

Yet even with the historic stimulus<\/a>, confidence in the private sector remains downbeat. The widely watched Ifo Business Climate index stagnated in January following two months of declines, pouring \u201ccold water on hopes of a stellar rebound for the German economy\u201d, according to ING\u2019s global head of macro Carsten Brzeski.<\/p>\n

Despite Wednesday\u2019s downgrade, the government is still more optimistic than Germany\u2019s central bank about the economy\u2019s prospects. <\/p>\n

The Bundesbank warned in December that the country has been\u00a0\u201cclearly in a recession since the end of 2022\u201d and projected 0.9 per cent growth this year, with one-third of that caused by a higher number of working days in 2026. <\/p>\n

In 2025, Germany\u2019s economy eked out 0.2 per cent growth, the first expansion since 2022. This was driven by higher consumer and government spending but private-sector investments and exports continued to decline last year.<\/p>\n

Many economists still hope that Chancellor Friedrich Merz\u2019s debt-funded investment will kick-start a stronger recovery that could spill over into the private sector. \u201cThe German economy is likely to recover significantly this year,\u201d wrote the country\u2019s largest lender Deutsche Bank in a note this week, as it reiterated its forecast of 1.5 per cent growth for 2026.<\/p>\n

However, recent government figures on 2025 spending show that Berlin is struggling to implement its investment plans. While federal investment rose by 17 per cent to \u20ac87bn, it was almost \u20ac29bn lower than originally budgeted. <\/p>\n

\u201cBy far not all investment funds had been disbursed,\u201d finance minister Lars Klingbeil acknowledged last week, adding that \u201cwe need to do better here\u201d.<\/p>\n","protected":false},"excerpt":{"rendered":"Stay informed with free updates Simply sign up to the German economy myFT Digest — delivered directly to…\n","protected":false},"author":2,"featured_media":443500,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[64,63,99,164],"class_list":{"0":"post-443499","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-au","9":"tag-australia","10":"tag-business","11":"tag-economy"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/443499","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=443499"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/443499\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/443500"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=443499"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=443499"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=443499"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}