The German economy has been dealt a blow as the Bundesbank, the central bank of Europe's largest economy, has cut its growth forecasts. The Bundesbank now predicts that gross domestic product (GDP) will increase by 0.3% this year, down slightly from its previous forecast of 0.4% in December. The central bank has also revised down its growth forecast for 2025 from 1.2% to 1.1%, although it raised its 2026 forecast from 1.3% to 1.4%. The downward revision in growth predictions is attributed to the slump in orders and production in the manufacturing sector [fee209c6].
This revision comes despite the European Central Bank (ECB) cutting interest rates for the first time in five years. The ECB lowered interest rates from a record high of 4% to 3.75% in an effort to stimulate economic growth. However, the ECB did raise its forecasts for inflation across the eurozone for this year and in 2025 [fee209c6].
The Bundesbank's revised growth forecasts highlight the challenges facing the German economy, particularly in the manufacturing sector. The slump in orders and production has contributed to the downward revision in GDP growth projections. The German government's upgraded growth forecast of 0.3% for this year now appears more uncertain in light of the Bundesbank's revised forecast. It remains to be seen how these conflicting predictions will impact the overall outlook for the German economy [fee209c6] [da72939f].