German economic growth set to accelerate in 4th quarter: Bundesbank chief

Germany's economy is expected to gain momentum in the fourth quarter, supported by increased defense and infrastructure spending, Bundesbank President Joachim Nagel said Wednesday.

Speaking at the Latvian central bank's economic conference in Riga, Nagel said recent assessments pointed to a stronger recovery than the Bundesbank had projected over the summer.

"Economic growth is likely to accelerate in the fourth quarter," he said.

Germany's economy grew 0.4% in the first quarter and 0.3% in the second, while preliminary estimates showed a 0.2% expansion in the third quarter despite transport disruptions caused by low water levels on the Rhine River.

Nagel said the International Monetary Fund, Germany's leading economic research institutes and the federal government projected growth of around 1.3% this year and 1.1% in 2027.

Manufacturing activity has picked up, particularly in the chemicals and electrical equipment sectors, while industrial orders suggest the recovery is likely to continue.

However, private consumption remains sluggish, and investment in machinery and equipment declined in the second quarter.

The Bundesbank is scheduled to release its next comprehensive economic forecast in December.

- Structural reforms needed

Nagel warned that increased public spending alone would do little to improve Germany's long-term growth potential.

He said additional infrastructure investment would provide a modest boost to potential output, while higher defense spending was unlikely to raise potential output growth in the foreseeable future.

Germany's potential growth rate currently stands at around 0.3%-0.4%, he said, citing a shrinking workforce, weak investment and sluggish productivity growth.

Nagel called for reforms to expand the labor supply, make the energy transition more efficient and improve conditions for private investment.

He also urged deeper European integration, including completing the single market and strengthening financial markets, to bolster economic growth and resilience amid increasing global fragmentation.