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S&P Forecasts Limited Economic Boost for Central Europe from Germany’s Fiscal Stimulus

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Business Honor
17 April, 2025

S&P Global predicts limited economic gains for Central Europe from Germany's fiscal expansion amid U.S. tariff impacts.

Central Europe is not expected to gain much economically from Germany's fiscal expansion, even though it has strong economic links with Europe's largest economy. S&P Global cautioned that although Germany has introduced a big stimulus package intended to revive its weak economy, the favorable impacts on Central European nations will be modest because of U.S. tariffs and prevailing uncertainties.

Germany's recent move to raise borrowing to spur its economy and corporate world is likely to contribute a mere 0.1 percentage point to Germany's GDP growth this year. In the long run, this effect could slowly increase to 0.9 percentage points by 2028, if the reforms are not delayed significantly. Yet, the advantages will be counteracted by externalities, more significantly the U.S. tariff effects, which will bring about uncertainties that will last well into 2025.

The trade link between Germany and Central Europe, especially the automobile industry, has been an important factor for the regional economies. Central European nations, including Poland, Czech Republic, and Hungary, export a significant percentage of their goods to Germany, making them susceptible to any weakening in the German economy. Though there is some insulation in Poland's large domestic market, the Czech Republic and Hungary are more at risk with their export orientation.

S&P also lowered the credit rating outlook of Hungary to negative due to rising risks from trade wars, lower EU funding, and increasing debt servicing costs. The agency lowered Hungary's growth forecast for 2025 from 3.0% to 1.5%, while that of 2026 was also lowered. The regional economic outlook in Central Europe is still vulnerable, and a great deal depends on international trade patterns and Germany's fiscal policy success.