Agency Report –
Berlin (dpa) – Germany on Wednesday lowered its 2025 growth forecast to 0.3%, down from 1.1%, as the country’s stagnant economy continues to struggle.
Economy Minister Robert Habeck announced the new gross domestic product (GDP) estimate in a presentation of the government’s annual economic report in Berlin.
The fall is partly attributed to the collapse of Chancellor Olaf Scholz’s three-party coalition in November, and the subsequent failure to implement a government initiative to stimulate growth.
The plan, which included tax breaks to incentivize investment, measures to lower electricity prices and labour reforms, had been central to the earlier forecast.
Another factor behind the revised figure is the potential for US tariffs on goods from the European Union under Donald Trump’s second term.
Germany’s economic woes are a major campaign issue ahead of elections on February 23.
Europe’s largest economy has struggled to recover from the effects of the coronavirus pandemic and the Russian war in Ukraine, which caused energy prices to surge.
The country saw a second consecutive year of recession in 2024 and the government is predicting another difficult year ahead.
The annual economic report forecasted a slight decline in exports is expected in 2025, with private consumption also remaining weak.
Inflation is expected to remain at 2.2%, slightly above the European Central Bank’s 2% target.
Stagnation is also having an effect on Germany’s labour market, with unemployment forecast to approach the significant mark of 3 million.
“The German economy has been in stagnation for two years now, which has cyclical but above all structural causes,” the report said.
It said companies are holding back on investments due to expensive energy prices and an excessive tax burden, as well as high social security contributions, too much bureaucracy and crumbling infrastructure.
In addition, the country’s demographics are an increasing problem amid a shortage of skilled labour needed to renew an ageing workforce.
Despite the long list of concerns, the government does see “light at the end of the tunnel” in 2026, with growth forecasted to reach 1.1%.
By Andreas Hoenig
