Germany’s government has sharply reduced its economic growth forecast for 2025 to just 0.3%, a major drop from the previous estimate of 1.1%. The announcement came on Wednesday as Europe’s largest economy struggles with ongoing economic problems.
The country’s economy has been weak for several years. Germany’s GDP shrank by 0.2% in 2024 and 0.3% in 2023, marking two consecutive years of decline.
Experts say that Germany has not seen real economic growth for the past four years.
Economic Crisis and Political Uncertainty
The economy is now a major topic in Germany’s upcoming early election on February 23, which was scheduled seven months early due to the collapse of Chancellor Olaf Scholz’s coalition government.
Candidates are offering different solutions to fix the economy, but there is no clear path forward.
Vice Chancellor Robert Habeck, who also serves as the Economy Minister, said that global crises have hit Germany’s export-heavy economy hard.
While inflation has decreased and an energy crisis was avoided, the country still faces serious structural issues, such as:
- A shortage of skilled workers
- Too much bureaucracy
- Weak investment in both private and public sectors
Habeck also pointed out that uncertainty about U.S. trade policy and Germany’s own post-election direction is making businesses and consumers hesitant to invest.
Industry Leaders Predict Even Worse Results
Germany’s largest industry lobby group, the Federation of German Industries (BDI), has an even more pessimistic outlook. On Tuesday, the group predicted that the economy will shrink again in 2025, by 0.1%.
Peter Leibinger, the head of BDI, criticized past governments, saying,
“For years, governments have delayed important reforms, held back investments, and settled for the status quo.”
With no clear solution in sight, Germany’s economic struggles are likely to continue into 2025.
