BERLIN, May 21 (Reuters) - The German Council of Economic Experts cut its economic forecast for the German economy on Wednesday, now expecting Europe's biggest economy to stagnate this year as it sees a "pronounced phase of weakness".
The academic body that advises the German government on economic policy had predicted the economy to grow 0.4% this year in its previous forecasts published in November.
Germany was the only member of the G7 advanced economies that failed to grow for the last two years, burdened by fiscal restraints and an industrial downturn.
The tariffs announced by U.S. President Donald Trump are expected to deal a major blow to its export-oriented economy.
"The German economy will be significantly influenced by two factors in the near future: U.S. tariff policy and the fiscal package," said Monika Schnitzer, chairwoman of the Council of Economic Experts.
The U.S. was Germany's biggest trading partner in 2024 with two-way goods trade totalling 253 billion euros ($284 billion).
On the bright side, Germany approved in March a fiscal plan which includes a 500-billion euro special fund for infrastructure investments, and largely removes defence investment from rules that cap borrowing. The fiscal package offers opportunities to return to a growth path, economists say.
Starting in 2026, the funds provided by the fiscal package will set positive impulses for investment in construction and equipment as well as government spending, the council said, forecasting 1.0% growth next year.
Private consumption is also expected to grow somewhat stronger in 2026 compared to 2025, as disposable incomes will increase more significantly in real terms, the council added.
($1 = 0.8898 euros)
Reporting by Maria Martinez, editing by Kirsti Knolle
Source: Reuters