The “Handelsblatt Research Institute” (HRI) predicts in its new economic forecast that the German economy will shrink by a mere 0.1% in the new year, after a decline of 0.3% in 2023 and 0.2% in 2024, marking the third consecutive decline in a row. This prolonged period of decline has never been seen in the history of the Federal Republic of Germany.
More than 20 years ago, in 2002 and 2003, the German economy had shrunk for the first time in a row, with the first official estimate of the economic development in 2024 expected to be published by the Federal Statistical Office on January 15. The HRI economists only expect a slight economic growth of 0.9% in 2026.
“The German economy is in its greatest crisis since the post-war period. The pandemic, energy crisis, and inflation have made Germans, on average, poorer” said Bert Rürup, chief economist at Handelsblatt. Given the reduced growth potential of 0.5%, no rapid improvement is in sight, “as the economy is at the beginning of a strong aging process.”
The institute is supported by consumption, both private and, above all, state, as the HRI suggests. Private consumption is expected to grow by 0.9% in 2025, and state consumption by 1.0%. The institute also expects inflation to remain above the two percent mark in both 2025 and 2026, which could put the European Central Bank in a dilemma in the near future, as it wants to stimulate the weak economy with low interest rates, but is still concerned about the high inflation rates.