By Maria Martinez
BERLIN (Reuters) -Germany’s Ifo institute cut its economic outlook on Thursday and warned that without credible delivery on pro-growth measures, Europe’s largest economy risks more years of stagnation.
The Munich-based institute expects gross domestic product to expand marginally by 0.2% in 2025 and 1.3% in 2026, shaving 0.1 and 0.2 percentage points from its summer projections.
For 2027, Ifo forecasts growth of 1.6%.
U.S. tariffs continue to weigh noticeably on the German economy, said Timo Wollmershaeuser, head of forecasts at Ifo.
Germany has struggled to regain momentum after two years of contraction, hit by weak global demand, high energy costs and a slide in industrial output.
“If economic policy remains at a standstill, further years of economic paralysis and erosion of Germany as a business location threaten,” Timo Wollmershaeuser said.
Ifo analysed the expected boost from Berlin’s planned economic policy, estimating the fiscal impulse at 9 billion euros this year, rising to 38 billion euros in 2026 and 19 billion euros in 2027.
Ifo expects the unemployment rate to rise to 6.3% this year, with joblessness up by 155,000 people, before easing to 6.1% in 2026 and 5.4% in 2027.
Inflation is seen at 2.2% this year and 2.1% in 2026, after an average 2.2% in 2024.
(Reporting by Maria Martinez, Editing by Rachel More)
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