BERLIN, Dec. 12 (Xinhua) -- Germany's long-awaited economic recovery appears to be slipping further out of reach, with key economic institutes cutting their forecasts for the coming years.
The Kiel Institute for the World Economy said on Thursday that the German economy is expected to stagnate in 2025, following a 0.3 percent contraction last year and a projected 0.2 percent decline in 2024.
"The German economy cannot escape its stagnation," the institute said in its report, adding that "there are few indications of a significant economic rebound." Growth for 2026 was also revised downward to 0.9 percent from the previously projected 1.1 percent.
The German Institute for Economic Research (DIW Berlin) echoed this grim outlook, forecasting just 0.2 percent growth for 2025, down from earlier estimates. However, growth is expected to pick up slightly to 1.2 percent in 2026, DIW said.
"We are facing a challenging combination of cyclical weakness and structural problems," said Geraldine Dany-Knedlik, head of economic forecasting at DIW. She pointed to increased energy and material costs, competition, and potential U.S. trade tariffs as major headwinds for Germany's export-driven manufacturing sector.
Meanwhile, the Ifo Institute offered a mixed forecast, presenting two scenarios depending on the government's economic policy response. Without decisive structural reforms, Germany's economy may only grow by 0.4 percent in 2025. However, the institute sees potential for 1.1 percent growth if the "right course of action" is taken.
"At this stage, it remains uncertain whether the current stagnation is a temporary slowdown or a more permanent shift marking a painful economic transformation," said Timo Wollmershaeuser, head of forecasts at Ifo.
Wollmershaeuser added that tight monetary policies in Europe and key German export markets have dampened industrial orders, further weighing on the economy. Still, there are some positive signals: purchasing power has improved, and inflationary pressures are expected to ease.
The Ifo Institute has projected that inflation will fall to 2.3 percent in 2025 and 2.0 percent by 2026 in both scenarios.
