Germany's central bank, the Deutsche Bundesbank, on Friday cut its growth forecasts and raised its inflation expectations for this year and next as the tensions in the Middle East weigh on the economy.
The bank projected that calendar-adjusted real gross domestic product (GDP) will grow by 0.5 percent this year and 0.8 percent in 2027 in their current Forecast for Germany, both lower than the 0.6 percent and 1.3 percent predicted last December.
In the summer half-year, expansionary fiscal policy will prevent a decline in economic output, the bank said.
However, multiple negative factors continue to drag down growth: rising energy prices have weakened residents' actual purchasing power, and enterprises are under dual pressure from supply chain bottlenecks and weaker market demand. The uncertainty of the trade outlook and the rise in interest rates will also restrain the growth of private investment.
In addition, The energy price shock is driving up inflation.
According to the Forecast for Germany, the inflation rate as measured by the Harmonised Index of Consumer Prices (HICP) will climb to 2.9 percent this year and will fall only slightly to 2.7 percent in 2027, significantly higher than the 2.2 percent and 2.1 percent predicted in December last year.
Germany cuts growth expectation, raises inflation forecast
Germany cuts growth expectation, raises inflation forecast
