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Germany's economy: stagnation in 2025! EU drastically cuts growth forecasts
The EU Commission predicts stagnating GDP in Germany for 2025. Serious reasons: customs policy and global uncertainty.
Germany's economy: stagnation in 2025! EU drastically cuts growth forecasts
The EU Commission presented its spring economic forecast in Brussels today, which has alarming news for Germany. Accordingly, German gross domestic product (GDP) is expected to stagnate in 2025. This assessment is in stark contrast to the previous forecast from November 2024, which expected slight growth of 0.7 percent for the German economy. According to current forecasts, growth of 1.1 percent should not be expected until 2026. This development is attributed to various factors, including international customs policy and growing global uncertainty, which have a negative impact on consumption, investment and exports.
How tagesschau.de reported, the growth forecast for the entire EU will also be lowered. Instead of the originally expected 1.7 percent, growth of just 1.1 percent is now forecast in the EU. Only Austria is expected to experience weaker economic development than Germany. For the Eurozone as a whole, an increase of 0.9 percent is expected, which also means a decrease of 0.4 percentage points compared to the last forecast.
Perspectives and challenges
The negative assessment of the German economy is particularly worrying given two years of recession. Both the federal government and the International Monetary Fund (IMF) are assuming that economic performance in Germany will stagnate. Despite these gloomy forecasts, there are also positive reports. For example, private spending has increased, and a billion-dollar financial package from the new federal government for defense and infrastructure could also have stabilizing effects.
EU Economic Commissioner Valdis Dombrovskis commented on the resilience of the EU economy and noted that inflation expectations have been lowered. In the euro area, inflation could possibly come closer to the European Central Bank's (ECB) two percent target. The expected inflation rate is 2.1 percent for 2025 and will fall to 1.7 percent in the following year.
Overall, the outlook for Germany and the eurozone remains tense. The economic conditions continue to require attention and possibly an adjustment of economic policy strategies in order to avoid a further slide into negative growth rates.