The European Commission released its spring forecast report on May 19, predicting that Germany's economy will enter stagnation this year with a growth rate of zero. This forecast is a significant downgrade from the 0.7% growth projected last November.

According to the latest predictions, Germany won't see an economic growth of 1.1% until 2026. The overall economic growth rate for the EU is expected to be 1.1%, while the Eurozone's GDP is forecasted to grow by 0.9%. Both figures represent a downtick of 0.4 percentage points from projections made in November.

EU Economic Commissioner Valdis Dombrovskis stated in Brussels that despite facing numerous challenges, the EU economy remains stable. Part of the reason for the downward revision of economic forecasts is attributed to the “unpredictable and seemingly arbitrary” tariff policies of the U.S. government, which have increased global economic uncertainty and prompted businesses to be more cautious in their investments. Germany is already facing a third consecutive year of zero economic growth.

Nevertheless, there are some positive signals emerging domestically in Germany. The declining inflation is enhancing household spending power, and corporate investment willingness is recovering. However, these positive factors have not been sufficient to offset the overall sluggish growth in the economy due to weak exports, leading to a predicted stagnation in the economy through 2025.

The multi-billion euro defense and infrastructure financial plan approved by the German Bundestag in February has also brought a cautious optimism. The EU Commission report states that this plan has significantly bolstered business confidence, leading to a “turning point in confidence.” Due to the lack of detailed explanations from the new government regarding its plans, the related effects are only considered in the forecasts as market sentiment. In the long term, these additional expenditures could substantially boost the German economy. According to a separate model calculation by the EU Commission, this fiscal stimulus plan alone could increase Germany's GDP by 1.25% more than previously forecasted by 2029, and potentially add 2.5% to growth by the end of 2035, provided that this portion of infrastructure investment comes solely from new debt and is specifically allocated to “productive projects.”

Among EU nations, Germany's economic performance ranks at the bottom, only slightly better than Austria, where economic contraction is predicted at 0.3%. The fastest-growing country is Malta (4.1%), followed by Denmark (3.6%) and Ireland (3.4%). In the larger economies of the EU, the forecast varies: France (0.6% growth) and Italy (0.7% growth) show moderate growth, while Spain is performing stronger with a projection of 2.6% growth.