German central bank president Joachim Nagel, gives a press conference at the end of the meeting of G7 finance ministers and central bank governors. Nagel, believes the German economy may be able to avoid a third consecutive year without growth. Kay Nietfeld/dpa
The head of Germany’s central bank, Joachim Nagel, believes the German economy may be able to avoid a third consecutive year without growth.
A “slight increase in overall economic output” could be possible this year Bundesbank President Nagel said on Monday at the Frankfurt Euro Finance Summit.
In its economic forecast published at the beginning of June, the Bundesbank had predicted stagnation for this year. However, Nagel said this forecast had not taken into account the fact that economic growth in the first quarter was stronger than initially estimated.
At the end of May, updated figures showed that Europe’s largest economy grew by 0.4% in the first three months of the year.
“For the German economy, the end of the long dry spell is on the horizon,” said Nagel. “However, the path does not lead us directly to a green oasis, but remains challenging – between growth-damaging tariff effects and growth-promoting fiscal policy.”
Economists expect that a massive spending package for infrastructure and defence will boost the economy from 2026 at the latest.
Nagel argued however that “spending money alone is by no means enough. Sustained higher growth in Germany can only be achieved if structural adjustments are made at the same time.”