The German economy is set to continue underperforming the average growth of the euro zone until 2026, according to new forecasts from the European Commission, released on Friday.
The European Commission’s Autumn Forecast predicts that Germany’s GDP will contract by 0.1% in 2024, a downward revision from previous projections, while the euro area is expected to grow by 0.8%.
High uncertainty has been weighing on consumption and investment, and the trade outlook has worsened as global demand for industrial goods weakened, the EU stated in its report.
Germany, the world’s third-largest economy, has been trailing the EU average since 2021 and is expected to shrink for a second consecutive year in 2024, making it the poorest performer among the Group of Seven rich democracies.
For 2025, the European Commission expects Germany’s economy to recover with a 0.7% growth rate, revised down from a previous forecast of 1.0%. Growth is expected to accelerate to 1.3% in 2026, though it will still remain below the euro zone average of 1.6%.
Overall, domestic demand is anticipated to be the main driver of growth in 2025 and 2026. With inflation continuing to ease, real household income is expected to recover, leading to a gradual rise in private consumption, the EU forecasted.
