GERMANY SLASHES 2025 GROWTH FORECAST TO ZERO – Amid US Tariff Fallout
The German government has sharply downgraded its economic outlook for 2025 and is now projecting zero growth.
According to the spring forecast announced Thursday by acting Economy Minister Robert Habeck, Europe’s largest economy could stagnate or contract for a third consecutive year. This follows back-to-back declines in 2023 and 2024.
The latest revision marks a significant shift from the previous official forecast issued in the autumn of 2024, which projected growth of 1.1 percent. Habeck attributed the downgrade primarily to “Donald Trump’s trade policies,” saying the U.S. threat and imposition of tariffs have significantly heightened global economic uncertainty and dampened growth prospects.
Habeck emphasised that these unpredictable trade policies have once again posed serious challenges for Germany’s export-reliant economy. He pointed to the country’s integration into global supply chains and its openness to international trade.
Domestically, Habeck noted that economic conditions have begun to stabilise. A decline in political uncertainty could help spark a gradual recovery in private consumption, he said, adding, “The fiscal policy decisions of the incoming government may provide positive momentum, although their effects will likely only become noticeable in the coming years.”
Germany has introduced an expansionary fiscal policy after amending its basic law to allow for increased public borrowing, including the creation of a 500-billion-euro infrastructure fund aimed at addressing long-standing public investment deficits.
But money alone won’t solve the problem, Habeck warned, citing persistent structural challenges such as skilled labour shortages. He urged the next government to address these issues “quickly and decisively.”
So far, in its coalition agreement, the incoming federal government has outlined a range of measures aimed at boosting the sluggish economy. These include corporate tax cuts, more flexible labour regulations, and the expansion of renewable energy.
According to the government projection, the German economy is expected to grow by 1 percent in 2026.
