German economic advisors forecast inflation rising to 3% in 2025

Germany's government economic advisors have downgraded their growth forecast and now predict inflation accelerating to 3% this year. The outlook signals further headwinds for Europe's largest economy, which has already been struggling with sluggish growth.

Germany's panel of government economic advisors has issued a sobering forecast for 2025, predicting that the country's already weak economic growth will slow by nearly half while inflation climbs to 3% over the course of the year.

The advisory body, which provides independent economic guidance to the German government, warned that the combination of slowing output and rising prices presents a challenging environment for policymakers. Germany's economy has been under pressure for several years, weighed down by high energy costs, weak industrial demand, and sluggish export markets.

The latest projections mark a notable deterioration compared to earlier estimates, with growth now expected to remain well below levels considered healthy for a major economy. The acceleration in inflation, if realised, would complicate any efforts to stimulate demand through fiscal measures.

Germany is the eurozone's largest economy, and its performance has significant knock-on effects for its trading partners, including the Baltic states and Estonia. A prolonged slowdown in German industrial output typically reduces demand for goods and services across the wider European single market.