Frankfurt (Reuters) – The economic growth of Germany will be lower this year than the estimates provide, and the increase in public spending will not stimulate growth significantly before the end of 2027, the Bundesbank warned on Friday.

Germany is the only economy in the G7 to have contracted in the past two years.

The projects of the new government aimed at considerably increasing infrastructure and defense expenses should support long -term growth, but the economy, very exporting, will be in difficulty for the moment, shaken by the trade war led by the US administration.

“New American customs duties and uncertainty about the future American policy are slowing economic growth at the moment,” said Joachim Nagel, president of the Bundesbank.

“It affected German industry at a time when it was starting to stabilize after a long period of weakness,” he noted.

The Bundesbank warns that exports will drop strongly this year and will only increase slightly in 2026, while the slowdown in industrial dynamics due to customs duties will weigh on the labor market and wage growth.

The vast German industrial sector has been in recession for several years due to high energy costs, aggressive Asian competition and low demand for a range of obsolete products in its automotive sector.

This weakness will lead to the stagnation of the economy this year, with growth of only 0.7% in 2026, indicates the Bundesbank in its semi -annual economic forecasts.

If the figure of 2025 is in accordance with most projections, the 2026 estimate is more pessimistic than the figures anticipated by the government or the European Commission, which both predict growth of at least 1%.

In April, German economic institutes lowered their growth forecasts to 0.1% for this year against 0.8% expected in September, taking into account the first American customs duties on steel, aluminum and cars.

German economic activity, however, progressed much more than initially estimated during the first quarter of 2025 compared to the previous one, thanks to the dynamism of exports and manufacturing production before the establishment of customs duties on the part of the United States.

Public spending, supported by changes in budgetary rules, in particular the reform of “debt brake” last March, should help the economy in the longer term.

“We are expecting additional defense and infrastructure public spending significantly increasing GDP growth by the end of 2027,” said Joachim Nagel.

(Balazs Koranyi report, Diana Mandia, edited by Augustin Turpin)

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