Ifo Institute cuts German growth forecasts, cites US tariffs
By Michele Maatouk
Date: Thursday 04 Sep 2025
(Sharecast News) - The Ifo Institute cut its German growth forecasts on Thursday, pointing to the impact of US tariffs.
The institute now expects the German economy to grow 0.2% this year and 1.3% in 2026. This is down 0.1 and 0.2 percentage points respectively from its summer forecast. The growth forecast for 2027 is 1.6%.
Timo Wollmershäuser, head of forecasts at Ifo, said: "The US tariffs are still having a noticeable negative impact on the German economy.
"The agreement in the tariff dispute between the United States and the EU is not expected to have any direct impact on the forecast, as the effective tariffs are largely the same as in the summer. Solely the uncertainty associated with the previous tariff dispute is likely to gradually recede, which will support the economy."
Ifo said its economic researchers expect less of a boost from the economic policy measures planned by the German government. They are expected to amount to € 9bn this year and only increase in 2026 and 2027 to €38bn and €19bn respectively.
"The German government's economic policy measures are likely to primarily take effect from next year. If they are implemented with rigor and conviction, and the current uncertainty declines as a result, the fiscal policy may haul the German economy out of the crisis," said Wollmershäuser.
"However, if economic policy remains at a standstill, there is a risk of more years of economic paralysis and the erosion of the business location."
The Ifo Institute said on Thursday that it expects unemployment to rise by 155,000 this year, with the unemployment rate increasing to 6.3%.
Unemployment is not expected to fall again until 2026 and 2027, to 6.1% and 5.4% respectively.
Inflation is likely to dip to 2.1% in 2026 from an average of 2.2% in 2024, Ifo said.
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