According to the Bundesbank, a new federal government starts in a difficult economic environment. The Bundesbank experts write in their report for the month of February in the first quarter of this year that German economic output could grow slightly in the first quarter of this year. At the same time, they find: “In the basic tendency, the German economy remains trapped in stagnation.”
In fact, companies continue to appreciate their current business situation skeptically. The IFO business climate remains 85.2 points in February, as the IFO Institute reports. Endler: Inside, a slight increase had expected. This remains the most important German economic barometer at a long -term low level. The approximately 9,000 companies surveyed by the IFO Institute look a little more optimistic about future business, the index value has increased somewhat. The current business situation, on the other hand, was badly assessed. “The companies were a little more dissatisfied with the ongoing shops,” comments IFO President Clemens Fuest.
Preliminary effects in export
One reason for the slightly positive expectation of the Bundesbank at the beginning of the year is the recently somewhat stronger demand for industrial products and construction work. Private consumption could also attract something thanks to increased wages. However, the mood of consumers remains: In view of the slightly increasing unemployment, it is difficult to save. Export could develop “a little less unfavorable” because, given the impending US tariffs, advanced effects can be expected.
Trump’s tariffs as a risk
In the medium term, the central bank sees the stricter trade policy course of the United States as a risk to world trade and global economy. Mutual additional tariffs could swing into serious trade conflicts, warns the analysis. Even more: “The increased uncertainty alone could already dampen the global economy.”
Last year, according to preliminary calculations by the Federal Statistical Office, German economic output has shrunk by 0.2 percent. Thus 2024 was the second year of recession in a row for Europe’s largest economy. For the final quarter of 2024, the statisticians calculated that the gross domestic product (GDP) decreased by 0.2 percent to the previous quarter.
Place of scope for additional debts
From the Bundesbank’s point of view, the future federal government has scope for additional debts. There is a need for action in the state infrastructure and the sustainable financing of defense spending. The debt brake makes an important contribution to securing solid state finances.
“Basically, however, it is easy to adapt to the credit brake to adapt the credit frame of the debt brake to changed framework conditions with a low state debt rate.” It would be important to have a focused administration that makes decisions quickly and uses the chances of digitization better.