In fact of the tiny 0.3% increase it had predicted earlier this year, the German government has formally lowered its economic growth prediction for 2025 to zero percent, indicating stagnation, according to Handelsblatt reports, this downgrade reflects ongoing economic challenges, such as the impact of U.S tariffs on steel, aluminum and automobiles, which continue to heavily weigh on Germany's export-driven economy. The revision was confirmed by a source to Reuters on April 22, 2025.
Germany has been the only G7 country not to experience growth over the past two years, and the new forecast suggests it may face a third consecutive year without economic expansion—an unprecedented situation for Europe’s largest economy, exports are expected to decline by 2.2% in 2025, following a 1.1% drop in 2024, although a rebound is anticipated in 2026 with projected growth of around 1%. Inflation is forecast to ease to 2% this year, down from 2.2% last year, which may help support consumer purchasing power.
Earlier in the year, economic research institutions like the Ifo Institute had already lowered their growth estimates, with Ifo cutting its forecast to 0.2% in March due to weak consumer sentiment and business investment hesitancy, other analysts had been more optimistic, projecting slight growth between 0.1% and 0.4%, but the overall consensus has shifted toward stagnation amid geopolitical uncertainties and structural challenges such as high energy costs, labor shortages, and global protectionism.
The industrial sector of the German economy continues to face challenges from heightened global competitiveness and declining demand, which are made worse by interruptions brought on by tariffs, government anticipates that the job market will remain strained and that unemployment would increase somewhat before stabilizing once more in 2026.
If geopolitical tensions subside and international trade stabilizes, the government projects a moderate recovery in 2026 with growth of about 1%, but there is still a lot of uncertainty, especially about the impact of US trade policy and the course of Germany economic reforms.
Germany has been the only G7 country not to experience growth over the past two years, and the new forecast suggests it may face a third consecutive year without economic expansion—an unprecedented situation for Europe’s largest economy, exports are expected to decline by 2.2% in 2025, following a 1.1% drop in 2024, although a rebound is anticipated in 2026 with projected growth of around 1%. Inflation is forecast to ease to 2% this year, down from 2.2% last year, which may help support consumer purchasing power.
Earlier in the year, economic research institutions like the Ifo Institute had already lowered their growth estimates, with Ifo cutting its forecast to 0.2% in March due to weak consumer sentiment and business investment hesitancy, other analysts had been more optimistic, projecting slight growth between 0.1% and 0.4%, but the overall consensus has shifted toward stagnation amid geopolitical uncertainties and structural challenges such as high energy costs, labor shortages, and global protectionism.
The industrial sector of the German economy continues to face challenges from heightened global competitiveness and declining demand, which are made worse by interruptions brought on by tariffs, government anticipates that the job market will remain strained and that unemployment would increase somewhat before stabilizing once more in 2026.
If geopolitical tensions subside and international trade stabilizes, the government projects a moderate recovery in 2026 with growth of about 1%, but there is still a lot of uncertainty, especially about the impact of US trade policy and the course of Germany economic reforms.
