German economy expected to recover slowly, banks association says

The German economy will recover from its prolonged period of weakness very slowly, growing by only 0.2% this year, according to the new forecasts of Germany's banks' association, seen by Reuters on Wednesday.

The association had previously forecast growth of 0.7% for this year in its forecasts published in September.

The economy is not expected to recover noticeably until 2026, with growth of 1.4%, the Association of German Banks said.


The German economy has contracted for two consecutive years and its prospects for this year have worsened after U.S. President Donald Trump announced a 25% tariff on imported vehicles, which is expected to hit German automakers particularly hard.

In 2026, the positive impact of Germany's fiscal package will be first reflected in growth figures, said Heiner Herkenhoff, CEO of the Association of German Banks.

"However, with strong reforms and the prospect of a competitive tax policy, the new government could stimulate investment earlier," Herkenhoff said.

The group is particularly concerned about corporate investment, which is expected to decline in real terms this year.

"Even the expected increase of 3.5% for 2026 is rather weak compared to previous recoveries," Herkenhoff said, noting that before the European sovereign debt crisis corporate investment regularly rose by double-digits in economic upswings.