German government forecasts economic stagnation in 2025, source says

BERLIN (Reuters) - The German government cut its economic forecast for this year and now foresees stagnation instead of 0.3% growth, a source told Reuters on Tuesday, confirming a report by the Handelsblatt newspaper.

For 2026, the government now expects growth of 1%, down slightly from its January forecast of 1.1%, according to the source.

The economy ministry declined to comment when asked about the forecasts and instead referred to a news conference on the new projections planned for Thursday.

Germany was the only G7 economy that failed to grow for the last two years, and the tariffs announced by U.S. President Donald Trump could put it on track for a third year without growth for the first time in history.

Uncertainty about how Europe's largest economy will develop in light of the tariffs served as the groundwork for the new forecast, Handelsblatt cited the sources as saying.

Exports are expected to fall by 2.2% this year, following a 1.1% decline in 2024. Next year, exports are expected to rise by 1.3%, according to the source.

Earlier this month, German economic institutes cut their growth forecast for this year to 0.1% from the 0.8% expected in September, taking into consideration initial U.S. tariffs on steel, aluminium and cars.

The German government foresees inflation falling to 2% this year and then to 1.9% next year, the source told Reuters, down from 2.2% last year.

Economic weakness will take its toll on the labour market, with the unemployment rate expected to go up to 6.3% this year from 6.0% last year, before falling to 6.2% in 2026.

(Reporting by Holger Hansen and Christian Kraemer, writing by Miranda Murray and Maria Martinez, editing by Rachel More, Kirsti Knolle and Bernadette Baum)