Merz Advisers Slash German Growth Forecast, See Faster Inflation

German Chancellor Friedrich Merz’s economic advisers nearly halved their growth forecast for this year, citing the war in the Middle East and US trade policy as headwinds. The revision signals materially weaker near-term activity for Europe’s largest economy, with external geopolitical and trade pressures weighing on demand and confidence. The downgrade is likely to reinforce a cautious risk-off view on German and broader European growth prospects.

Analysis

German Chancellor Friedrich Merz’s economic advisers nearly halved their growth forecast for this year, citing the war in the Middle East and US trade policy as headwinds. The revision signals materially weaker near-term activity for Europe’s largest economy, with external geopolitical and trade pressures weighing on demand and confidence. The downgrade is likely to reinforce a cautious risk-off view on German and broader European growth prospects.