German economy expected to stagnate in 2nd quarter: Bundesbank
Germany's central bank says additional headwinds added by US tariffs to the country's already existing burdens
ISTANBUL
The German Central Bank (Bundesbank) expects the economy to stagnate in the second quarter due to the impact of US tariffs, according to the central bank's May monthly economy report, which was released on Thursday.
The report emphasized that a wide range of burdens remain in the German economy, and the US's tightening tariff policy added to the headwinds.
"This affects the export industry in particular, which is already struggling with a difficult competitive position and weak demand. Foreign demand for German industrial products remains weak," the report said.
"The US administration’s trade policy is weighing on the export outlook not only through imposed or threatened tariffs, but also through the steep appreciation of the euro associated with financial market responses," it added.
The report noted that the US government's tariff policy is likely to slow down the German industry in the second quarter of the year.
It emphasized that the measures agreed upon by Germany's newly formed coalition government, which include supply-side initiatives such as reduced bureaucracy, support for digitalization, and tax breaks for investment, might strengthen the economy.
"The measures agreed in the coalition agreement are likely to support economic activity in the coming years," it said.
Germany's economy had contracted 0.2% in the whole 2024, following a 0.3% contraction in 2023.
The German government also lowered its growth forecast for this year to 0% last month, and the German Council of Economic Experts (SVR), which advises the government, cut its 2025 growth forecast for the economy from 0.4% to 0% on Wednesday.
On the other hand, Germany's gross domestic product (GDP) increased 0.2% in the first quarter, following a 0.2% decline in the previous quarter, avoiding a recession.
