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German economy: mini-growth with new challenges in 2025!
The OECD forecasts only 0.4% growth for the German economy in 2025, while trade conflicts and inflation weigh on it.
German economy: mini-growth with new challenges in 2025!
The German economy remains weak, as the OECD states in its latest forecast. Mini-growth of just 0.4 percent is expected for 2025. Germany is one of the slowest-growing industrial nations, with only Norway and Austria performing worse. These developments are not only a result of internal factors, but are also influenced by foreign policy uncertainties and trade conflicts. daily news reports that the EU Commission and German economists are even predicting stagnation in economic power by 2025.
A bright spot could come in 2026, which is expected to see growth of 1.2 percent, slightly above previous forecasts of 1.1 percent. The reasons for this more optimistic outlook are the end of domestic political uncertainty as well as increasing consumer sentiment and a planned investment offensive by the government. Nevertheless, consumers have significantly reduced their willingness to buy due to rising prices, which were triggered, among other things, by the war in Ukraine. Stuttgart News add that private consumption is not gaining the desired momentum despite a normalization of inflation.
Trade conflicts and their consequences
A significant factor that is putting additional pressure on the economic situation are trade conflicts and high energy prices. The OECD warns of increasing trade barriers, which could further weigh on growth forecasts. Around 10 percent of exported goods go to the USA, which makes the export-strong German economy vulnerable. OECD chief economist Álvaro Pereira has already warned of increased trade barriers, which could have a lasting impact on Germany's economic performance in the future.
Despite these challenges, the federal government can support private consumption through higher government spending, including due to new debt rules. Recruiting qualified workers from abroad should be given priority in order to counteract the shortage of skilled workers. However, the situation remains tense, as experts also warn of rising inflation, which could further increase demand and prices.
Global economy in focus
The OECD estimates global economic growth at 2.9 percent for 2025 and 2026, down from 3.3 percent in 2024. Such global economic conditions also have an impact on the German economy. The OECD therefore promotes economic cooperation between industrialized nations with the aim of achieving sustainable growth, creating more employment and increasing living standards. Germany is a founding member of the OECD and plays a central role in the international economic structure.