More hope for the economy: Bundesbank President: Mini-growth 2025 possible

According to the Bundesbank President Joachim Nagel, the German economy could be overnight by growth in 2025 without growth. A “easy increase in the overall economic performance” could be possible on average, Nagel said on Monday at the “Frankfurt Euro Finance Summit”.

In its economic forecast published in early June, the Bundesbank predicted stagnation this year. According to this forecast, however, Nagel could no longer be taken into account that economic growth in the first quarter was twice as strong as initially calculated.

Another way out of the valley

“The end of the long dry spell is emerging for the German economy,” said Nagel. “However, the path does not lead us directly into a green oasis, but remains challenging – between customs effects that are harmful to growth and fiscal policy, which is promoting growth.”

In general, economists expect the planned billion dollar expenses for infrastructure and defense to push the economy at the latest from 2026. However, Nagel emphasized: “With spending the money alone, by no means everything is done. A continuously higher growth in Germany can only be achieved if structural adjustments are also made in parallel.”

Europe put great hopes for the new government. “It could actually become a gymnastics store story,” said Nagel. “Germany has to become a success story.” It must be possible to tackle and solve economic structural problems.

Plenty of uncertainties

In addition to the sudden customs policy of US President Donald Trump, there are further uncertainties. In this way, the economic effects of the conflict in the Middle East cannot currently be estimated, as Nagel explains. “If there is a long-lasting, serious conflict,, for example, oil prices could increase significantly. The economic perspectives could then change noticeably compared to what I tell them today-with regard to the economy as well as the prices,” said the Bundesbank President.

Towage stabilizes

At the moment, he is confident that “inflation will level off sustainably at 2 percent and that we will achieve our medium -term inflation goal,” said Nagel. The European Central Bank (ECB) is aiming for price stability with a medium -term inflation rate of 2.0 percent in the euro area. The higher the inflation rate, the lower the purchasing power of the people because they can then afford for one euro less.

Nagel, who decided in the ECB council about monetary policy in the euro area, also warned: “Even if inflation in the euro area is around 2 percent again and should also be there again in the medium term, the monetary policy has no reason to reduce.”