Riga:Germany's economy is anticipated to gain momentum in the fourth quarter, aided by increased defense and infrastructure spending, stated Bundesbank President Joachim Nagel on Wednesday.

According to Anadolu Agency – English, Nagel made these remarks at the Latvian central bank's economic conference in Riga, highlighting that recent assessments indicate a stronger recovery than previously projected by the Bundesbank during the summer. He emphasized that "economic growth is likely to accelerate in the fourth quarter."

Germany's economy saw growth rates of 0.4% in the first quarter and 0.3% in the second quarter, with preliminary estimates showing a 0.2% expansion in the third quarter despite transport disruptions caused by low water levels on the Rhine River. The International Monetary Fund, Germany's leading economic research institutes, and the federal government project a growth rate of around 1.3% for this year and 1.1% in 2027.

Manufacturing activity in Germany has shown improvement, particularly in the chemicals and electrical equipment sectors, and industrial orders suggest that the recovery is likely to continue. However, private consumption remains weak, and investment in machinery and equipment saw a decline in the second quarter.

The Bundesbank plans to release its next comprehensive economic forecast in December. Nagel cautioned that increased public spending alone would not significantly enhance Germany's long-term growth potential. While additional infrastructure investment could modestly boost potential output, higher defense spending is unlikely to increase potential output growth in the near future.

Germany's potential growth rate currently stands at approximately 0.3%-0.4%, attributed to factors such as a shrinking workforce, weak investment, and sluggish productivity growth. Nagel advocated for reforms to expand the labor supply, improve the energy transition's efficiency, and enhance conditions for private investment. He also called for deeper European integration, including completing the single market and strengthening financial markets, to bolster economic growth and resilience amid increasing global fragmentation.