Germany’s central bank significantly lowered its growth outlook for the country yesterday.
And the Bundesbank also warned the outlook for Europe’s biggest economy could sink further if Donald Trump imposes harsh trade tariffs.
The bank now expects gross domestic product to fall 0.2 percent this year – a second year in a row of contraction – before forecasting growth of 0.3 percent.
Then the outlook for 2025 growth was lowered from 1.1 percent to 0.2 percent.
The deal could be even worse if Trump becomes US president-elect, including up to 60 percent import tariffs on Chinese goods and 10 percent on other economies including Germany. That could put inflation down 0.6 percent from last year’s growth, the Bundesbank said.
The export-driven German economy will ‘suffer a lot from the US policy change,’ said a report published by the central bank.
Concerns: The Bundesbank warned that prospects for Germany’s economy could sink further if Donald Trump imposes harsh trade tariffs.
‘Because of its heavy dependence on exports it is particularly vulnerable to the decline in foreign demand caused by international trade deficits caused by restrictive trade policies.
‘Increasing uncertainty will weigh on the German economy.’ Germany’s industrial sector – including its once-strong auto industry – has struggled since it lost access to Russian energy due to the conflict in Ukraine and China’s lack of interest in imports. Germany.
The crisis has caused a crisis at Volkswagen that has been broken by strikes this month after the company threatened to close plants in Germany for the first time in its 87-year history.
Political uncertainty has dampened growth prospects as Germans prepare to go to the polls in February after a general election amid disapproval of the country’s economy.
Bundesbank President Joachim Nagel said: ‘The German economy is not only suffering from permanent economic problems but also from structural problems.
‘The labor market is now also reacting to the long-term weakness in economic activity.’
Acknowledging the threat posed by Trump’s plans, he added: ‘The biggest source of uncertainty for the forecast is the growing global pressure on protectionism.’
The European Central Bank (ECB) cut interest rates to 3 percent this week – the fourth reduction this year – amid weak growth and political uncertainty in Germany and France. ECB president Christine Lagarde said efforts to reduce inflation – now at 2.3 percent – were working but predicted ‘economic recovery will be slow’.
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