Germany's economy: growth forecast falls to a low 0.4%!

Germany's economy: growth forecast falls to a low 0.4%!

In the OECD's latest growth forecast, published on June 3, 2025, Germany remains one of the slowest-growing industrialized nations. According to the new data, gross domestic product (GDP) is expected to grow by just 0.4 percent in 2023, which represents a drastic correction compared to previous forecasts that predicted 3.1 percent for 2023 and 3.0 percent for 2024 in March. This development puts Germany, along with Mexico, in third-to-last place among European economies, with only Austria and Norway having to settle for even worse values. This circumstance raises serious questions about economic stability and future prospects.

However, a positive signal is the rapid formation of a government and the upcoming public investments in defense and infrastructure. These measures could help stabilize investor and consumer confidence. According to the OECD experts, it shows that political uncertainty has been reduced, which could support the economic climate.

Outlook for the coming years

The forecast for 2026 calls for a slight increase in GDP of 1.2 percent, which is also an adjustment from the previous 1.1 percent. However, uncertainty remains high, particularly due to high trade tensions that are slowing investments in export-oriented companies. US President Trump has announced high tariffs since January 2023, which is putting additional strain on trade relations.

The OECD has significantly corrected the growth forecasts for the German economy as a whole. Particularly worrying is the forecast for 2025, where GDP is expected to grow by just 0.4 percent, almost halving the original estimate of 0.7 percent in December. Mexico will also be hit particularly hard and sees a forecast GDP contraction of -1.3 percent for 2025.

Public investment and the need for reform

For 2026, the forecast for economic growth in Germany was lowered from 1.2 to 1.1 percent. According to experts, investments in public projects, such as the financial package for defense and infrastructure discussed in the Bundestag on Tuesday, could have a significant impact on economic growth. However, the implementation of these measures could take time and only have minor effects in the current year.

Experts emphasize that Germany can afford the financial package because the debt ratio is lower than in many other OECD countries. Nevertheless, structural reforms are necessary to create scope for debt repayments and to stabilize economic planning. The ifo Institute only forecasts minimal growth of 0.2 percent for 2025. In addition, the Federal Ministry of Economics sees a high level of domestic and foreign policy uncertainty, which is further putting a strain on the economic situation.

In a broader context, the OECD's global growth forecast for 2025 was cut to 3.1 percent, which is 0.2 percentage points lower than previously expected. Reasons for this downward revision include higher trade barriers in G20 economies and increased geopolitical uncertainties. In the USA, economic growth is forecast at 2.2 percent in 2025, while it is expected to fall to 1.6 percent in 2026.

The current situation represents a serious challenge for Germany that encompasses both political and economic dimensions. The coming measures and reforms will be crucial in overcoming the stagnating growth trend and sustainably stabilizing the economy.

For more information, visit the articles from BR and daily news.