GERMANY: IFO Upwardly Revises Growth Forecasts, Calling Low Point Being Passed

IFO upwardly revised its German growth forecast, by 0.1pp to 0.3% 2025 and, more significantly, 0.7pp to 1.5% in 2026. "The crisis in the German economy reached its low point in the winter", IFO comment.

• "Economic researchers see risks in US trade policy. The import tariffs already imposed – assuming they remain at the current level – will impact economic growth by 0.1 percentage points in 2025 and 0.3 percentage points in 2026. If an agreement is reached in the trade conflict, growth in Germany could be higher, while an escalation could lead to a renewed recession."
• "The inflation rate will be 2.1 percent in 2025 and 2.0 percent in 2026. The labor market is expected to stabilize. The unemployment rate will rise to 6.3 percent in 2025 and fall slightly to 6.1 percent in 2026."
• "The general government financing deficit will fall from 2.7 percent of GDP in 2024 to 2.3 percent in the current year. It is expected to rise to 3.4 percent in 2026 due to expansionary measures. The gross debt will increase accordingly from 62.5 percent to 64 percent of GDP."
• Private sector consensus for German GDP growth has not (yet) shifted upwards yet, with MNI's collation of sellside analysts sitting at 0.0% Y/Y for 2025 (unrevised during the last month, downwardly by 0.2pp revised during the two months prior).