Bundesbank: Nagel calls for reforms – despite better economic prospects

Berlin. The Bundesbank is more confident about the German economy than it was in the summer. “Our interim assessments point to a stronger recovery than we expected in the summer,” said Bundesbank boss Joachim Nagel on Wednesday at a Latvian Central Bank conference in Riga.

In their Germany forecast presented in June, the experts at the Bundesbank predicted that calendar-adjusted real gross domestic product (GDP) would grow by 0.5 percent in the current year and by 0.8 percent in 2027. The German central bank plans to publish its next full forecast in December. From Nagel's point of view, the fact that there are now signs of a stronger economic recovery than expected in June is encouraging, but no reason to feel safe.

Fiscal policy is unlikely to noticeably increase growth potential. According to Bundesbank estimates, additional public investments in infrastructure will strengthen production potential, but only to a very moderate extent. However, additional defense spending is not expected to make a positive contribution to growth in production potential in the foreseeable future.

“This is precisely why Germany must make progress with structural reforms,” warned Nagel. Germany must expand its labor supply, make the energy transition more efficient and create better conditions for investment and innovation. “I am confident that the incumbent federal government will continue to tackle these challenges resolutely,” emphasized the Bundesbank boss.