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Germany's economy at a crossroads: growth or deindustrialization?
The IFO Institute forecasts economic growth of between 0.4 and 1.1 percent for 2025, depending on future policies.
Germany's economy at a crossroads: growth or deindustrialization?
The IFO Institute provides fresh forecasts for the German economy and expects growth of 0.4 to 1.1 percent next year, depending on the future economic policy of the new federal government. This assessment, published on December 12, 2024, emphasizes that an optimistic scenario can only be achieved if the structural challenges can be overcome. Otherwise, Germany could slide into creeping deindustrialization, according to the IFO Institute. The fear of permanent economic stagnation is real. How Deutschlandfunk reports, the uncertain order situation in the industry is causing additional concerns.
The IFO Institute also recognizes a lack of competitiveness, as German industry has increasingly lost its international strength. Timo Wollmershäuser, the institute's head of economic activity, makes it clear: "The decisive factor will be whether the export-oriented German economy can benefit again from growth in other countries." A reliable course by the next government could increase production capacities and investments in industry again and thus stabilize the labor market. In the best case, this could also lead to an increase in private consumption and reduce the savings rate. These developments would be a prerequisite for the economy to gradually return to prosperity FashionUnited reported.
Economic signs and future prospects
However, the forecasts also show ongoing challenges: In a pessimistic scenario, economic stagnation could temporarily increase unemployment while structural change continues. Inflation is estimated at 2.3 percent next year, with a further return in purchasing power, but the economy's response to external growth opportunities is crucial. The IFO Institute also forecasts growth of 1.2 percent for the euro area and 2.5 percent for the USA in the coming years. The recovery therefore depends not only on domestic reforms, but also on whether German companies can survive global competition.