Germany slashes growth outlook in 'serious' diagnosis of Europe's largest economy
The German government on Wednesday slashed its gross domestic product forecast to just 0.3% growth in 2025.
"The diagnosis is serious," Robert Habeck, economy and climate minister, said during a press conference, according to a CNBC translation. He noted that, while there are some positive developments such as rising demand for credit, "Germany is stuck in stagnation."
The latest GDP estimate is sharply down from an October projection of 1.1% growth this year, but broadly in line with forecasts from other economic bodies. The International Monetary Fund earlier this month cut its outlook and now sees 0.3% growth for the German economy this year, while the federal Bundesbank in December said it was anticipating the GDP to increase by 0.2% over the period.
In contrast, the association of German Industry on Tuesday forecast the country's economy will contract by 0.1% in 2025, in what would be the third annual decline in a row.
Annual GDP figures released earlier this month showed that Germany's economy contracted by 0.2% in 2024, after already shrinking 0.3% in the previous year. Quarterly GDP figures have also been sluggish, but so far a technical recession, which is characterized by two consecutive quarter of contraction, has been avoided.
Habeck said that several key reasons underpinned the downward revision of the GDP forecast. Among them is the fact that the current government's growth initiative plans could not be implemented fully because of the premature end of the administration's term, along with questions surrounding the outcome of the upcoming election. Habeck also cited geopolitical uncertainty, following the White House return of U.S. President Donald Trump and the possibility of tariffs against European