Berlin brought down its 2025 economic growth forecast from 1.1% to 0.3%. A government report cited the collapse of the government as the main reason.
The German government announced on Wednesday an economic growth forecast of 0.3% for the year 2025, down from the 1.1% projected last October.
The shrunk growth projections come amid the return of US President Donald Trump to the White House and the upcoming federal elections next year.
Why did the forecast change?
A report by the Economy Ministry expected Germany’s poor economic performance to extend to this year as well, following two years of recession.
“Germany is stuck in stagnation,” Economy Minister Robert Habeck told a press conference in Berlin.
The report said the revision of the growth forecast was “mainly due” to the collapse of the government last November, which led to a disruption in measures intended to encourage growth.
Chancellor Olaf Scholz’s coalition government collapsed in November, after his Social Democrats (SPD) and the Greens fell out with their coalition partner, the neoliberal Free Democratic Party (FDP), over budget disagreements.
While Europe’s biggest economy awaits anew government following the February 23 elections, the country’s future economic policy remains uncertain.
The report also said the downgrade was due to the “significantly” increased risks to trade, amid the return of US President Donald Trump to the White House, and the potential changes to US policy he could introduce.
Meanwhile, a survey conducted by fund provider Union Investment found that 53% of the respondents expected their own financial situation to remain stable in the next 12 months, while 30% even believed it would improve.
