Economic crisis looming: zero growth expected for Germany in 2025

Economic crisis looming: zero growth expected for Germany in 2025

The Advisory Council for the Assessment of Overall Economic Development presented its spring report in Berlin on May 21, 2025. The current report expects the German economy to stagnate this year. This represents a significant correction, as weak growth of 0.4 percent was still forecast in autumn 2024. The decline in growth forecast is mainly attributed to the negative impact of US tariff policy, which has seriously alarmed economists. Loud Deutschlandfunk The German economy is experiencing a weak phase in which the influence of global growth is hardly noticeable.

The chairwoman of the Council of Experts, Monika Schnitzer, explained the complex interactions between US customs policy and German economic growth. The trade conflict is particularly painful for German exporters, who exported 161.3 billion euros to the USA in 2024. This represents 10.4 percent of all German exports. Negative effects on investment decisions are therefore to be feared. In a further step, the EU Commission has also lowered its forecast for Germany to zero growth, which takes into account the worrying trend that the entire euro area economy is also expected to grow by only 1.1 percent, while the global economy is estimated at 2.1 percent.

Policy measures and outlook

In view of the stagnating economy, the Federal Ministry of Economics has announced an emergency program to reduce the pressure on the economy. The aim of this program is to reduce energy costs and remove urgently needed bureaucratic hurdles. daily news reports that around 65 billion euros a year arise from bureaucratic obligations at the federal level, which place additional strain on the economy.

Another aspect is the positive impulses that are expected from a new financial package from the federal government. This package is intended to make it possible to provide loans for important areas such as defense, civil defense, intelligence and cybersecurity. A special fund of up to 500 billion euros has already been created for infrastructure repairs. The challenge, however, will be to use the funds from this package in an investment-oriented manner to address the urgently needed structural changes through decarbonization, digitalization and demographic changes.

In summary, the German economy is facing significant challenges that make it necessary to prepare regions for the expected structural upheavals and to promote innovative business models. The Council of Experts sees a lot of catching up to do in reducing bureaucracy in order to secure Germany's competitiveness in the long term.