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Germany's economy stagnates, 0.2% growth forecast for 2025: ifo

19 Mar '25

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Germany's economy stagnates, 0.2% growth forecast for 2024: ifo

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Germany's economic growth is stagnating, with 0.2 per cent GDP growth forecast for 2025, revised down by 0.2 percentage points, according to the ifo Institute.
Structural change, weak demand, and political uncertainties in Germany and the US are paralysing industry and investment.
Rising US tariffs could hurt German exports, while domestic policy decisions remain uncertain, posing risks to forecasts.

Structural change and uncertainty are paralysing industrial activity and the consumer economy in Germany. The country’s economy is expected to witness a growth of 0.2 per cent in price-adjusted GDP for 2025, a downward revision of 0.2 percentage points from its winter forecast, according to ifo Institute for Economic Research. Germany’s economic growth may see only a slight improvement by 2026, with GDP expected to rise by 0.8 per cent.

“The German economy is treading water. Despite a recovery in purchasing power, consumer sentiment remains subdued, and companies are also reluctant to invest,” said Timo Wollmershäuser, head of forecasts at ifo. “Reliable economic policy is vital to creating confidence and stimulating investment. Companies need planning certainty, especially in view of the current challenges posed by structural change in industry.”

Industry is suffering from weak demand and increasing international competitive pressure. At the same time, political uncertainties in both Germany and the United States are creating considerable risks. The new US administration has adopted an erratic and protectionist economic policy. Import tariffs already announced on goods from Mexico, Canada, and China and retaliatory tariffs are having initial negative impacts on the US and global economies, ifo said in a press release.

If tariffs on European products are additionally increased, this could hit German export business hard. There are also uncertainties as regards domestic politics. Although measures to strengthen infrastructure and defense are being discussed, it remains to be seen when they will be implemented.

“Against the backdrop of the upcoming economic policy decisions in Germany and the United States, there is a high risk that the forecasts might prove wrong,” the release added.

Fibre2Fashion News Desk (SG)

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