Germany's economic performance has emerged as a pivotal topic in the lead-up to the February election, with inflation remaining a key concern. In January, German inflation held steady at 2.8% year-on-year, aligning with forecasts from economists polled by Reuters. This data is among the last significant economic indicators released before voters head to the polls. The harmonized consumer price index fell by 0.2% on a monthly basis, yet inflation has stayed above the European Central Bank's 2% target for a fourth consecutive month.
The country's economy has been grappling with lackluster growth, which has become a focal point during election campaigns. Quarterly growth remains sluggish, prompting the government to slash its gross domestic product expectations to just 0.3% for the full year 2025. This decision comes amid a backdrop of annual GDP contraction over the past two years. While Germany has managed to avoid a technical recession thus far, the threat looms large over Europe's largest economy.
Inflation is not only a national concern but also a regional one, as evidenced by Euro area inflation, which reached 2.4% in December. Despite these challenges, the European Central Bank has reassured that disinflation across the bloc is "well on track." However, non-harmonized inflation in Germany is projected to average 2.2% this year, adding pressure on policymakers.
The lackluster economic growth and persistent inflation rates have intensified discussions among political leaders and constituents alike. As Germany approaches its election, these economic challenges will likely influence voter sentiment and decision-making.