MNI BRIEF: Fiscal Policy To Boost GDP By 1.3% By 2028 - BBK

German government spending on defence and infrastructure will add 1.3% to GDP growth by 2028, the Bundesbank said on Friday, with rapidly growing social security expenditure to be offset by sharply rises in contributions.

The domestic economy is expected to grow by 0.2% in 2025, by 0.9% in 2026 (compared with the 0.2% and 1.0% seen by IWH), and by 1.4% in 2027. Production is expected to grow by 0.4% per year across the forecast period. The debt ratio will rise to 68%. (See MNI INTERVIEW: German China Plan Likely To Fail - Holtemoeller)

The Bundesbank sees inflation falling from 2.3% in 2025 to 2.2% in 2026 and around 2% in 2027 and 2028, with risks to the downside. The general government deficit ratio will increase sharply overall, from 2.5% in 2025 to 4.8% in 2028.