German economic institutes cut forecast for 2025 to 0.1% growth, sources say

By Rene Wagner and Christian Kraemer

BERLIN (Reuters) - German economic institutes have cut their forecast for this year to 0.1% growth from the 0.8% growth expected in September, two sources told Reuters on Tuesday, adding that the revision does not include yet the latest tariffs announced by the United States.

Germany was the only G7 economy that failed to grow for the last two years. The tariffs announced by President Donald Trump will deal a major blow to Europe's biggest economy, possibly putting it on track for a third year of recession for the first time in history.

For 2026, the institutes forecast economic growth of just above 1.0%, the sources said, without giving an exact number. The previous forecast for next year was 1.3%.

After the February election, the conservatives led by Chancellor-in-waiting Friedrich Merz and the Social Democrats, who are negotiating to form a government, announced a 500 billion euro ($544 billion) fund for infrastructure and sweeping changes to borrowing rules to bolster defence and revive growth.

The fiscal package improves the economic outlook for 2026 and 2027.

The new forecasts factor in U.S. tariffs of 25% on EU aluminium, steel and cars, but not the tariff increases of 20% on other goods announced last Wednesday, the sources told Reuters.

The forecasts will be officially published on Thursday. The economy ministry incorporates the combined estimates from the institutes into its own predictions.

(Reporting by Maria Martinez, Rene Wagner and Christian Kraemer; Editing by Friederike Heine and Rachel More)