Germany’s Growth to Gain Speed in Q4 as Defense Spending Kicks In
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MENAFNAddressing an economic conference hosted by Latvia’s central bank in Riga, Nagel said the latest data point to a firmer recovery than the Bundesbank forecast over the summer.
“Economic growth is likely to accelerate in the fourth quarter,” he said.
The numbers show a steady, if modest, climb. Output rose 0.4% in the first quarter and 0.3% in the second. Preliminary estimates put third-quarter expansion at 0.2%, even as low water levels on the Rhine River disrupted transport.
Nagel said the International Monetary Fund, Germany’s leading economic research institutes and the federal government all see growth of about 1.3% this year and 1.1% in 2027.
Factories are gaining ground, led by the chemicals and electrical equipment sectors, and industrial orders suggest the rebound will continue. Weak spots remain: private consumption is sluggish, and investment in machinery and equipment fell in the second quarter.
The Bundesbank will publish its next full economic forecast in December.
Reforms, not spending alone, key to long-term growth
Nagel cautioned that extra public spending will do little by itself to lift Germany’s long-term growth potential. Added infrastructure investment would give potential output only a modest lift, he said, while higher defense spending is unlikely to raise potential output growth in the foreseeable future.
He put Germany’s potential growth rate at roughly 0.3%-0.4%, citing a shrinking workforce, weak investment and sluggish productivity growth.
To change that picture, Nagel called for reforms that expand the labor supply, make the energy transition more efficient and improve conditions for private investment.
He also pressed for closer European integration, including completion of the single market and stronger financial markets, to support growth and resilience as global fragmentation deepens.
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