OECD lowers forecasts: Germany's economy fights against uncertainty!

OECD lowers forecasts: Germany's economy fights against uncertainty!

The OECD recently revised down the growth forecast for the German economy and only sees meager growth of 0.4% for 2025. That figure was drastically reduced from a previously forecast 0.7% in December. According to the OECD, a major association of Western industrialized countries that includes 38 member countries, Germany ranks particularly poorly in this forecast, trailing only Mexico with a forecast of -1.3%. The OECD forecast points to significant challenges facing the German economy, particularly due to ongoing global trade conflicts and weak consumer sentiment.

A central problem of the current economic situation is the uncertainty in international trade and restrained consumer spending. The USA's protectionist tariff policy has not only put a strain on trade relations with the EU, but has also had a direct impact on the stability of the internal market. These protective measures mean that consumers in Germany are increasingly tending to adopt a wait-and-see attitude.

Government plans for stabilization

In order to counteract this worrying development, the federal government is planning a comprehensive investment offensive for the coming year. The investments should flow specifically into infrastructure and digitalization with the aim of strengthening Germany's competitiveness in the long term. Experts see these measures as an important step towards stabilizing the economic situation.

Nevertheless, there is still great uncertainty about future economic developments. In addition to the unresolved trade conflicts, there are also geopolitical tensions that could put additional strain on the forecasts. The OECD also cut global growth forecasts to 3.1% for 2025, a decline of 0.2%. A forecast of 2.2% for 2025 and 1.6% for 2026 was set for the USA.

Long-term prospects

For 2026, the growth forecast for Germany was reduced from 1.2% to just 1.1%. The federal government's financial package, which includes both defense and infrastructure, is not yet taken into account in this current forecast, but experts estimate that it could have a significant impact on economic growth. The measures to strengthen the economy could initially have little effect, but it is emphasized that Germany can afford relief since the debt ratio is relatively low compared to international standards.

The Ifo Institute has even forecast minimal growth of 0.2% for 2025, which further fuels concerns about the German economy. The Federal Ministry of Economics points out that there are significant domestic and foreign policy uncertainties that also need to be managed. In summary, the German economy is facing difficult times in which quick but well-thought-out measures are required in order to successfully meet the challenges.

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