Germany's acting Vice Chancellor and Minister of Economic Affairs, Habeck, attended a press conference in Berlin on the 24th to present the federal government's spring economic forecast. He stated that Germany's economy is expected to stagnate in 2025, which means zero growth.
This signifies that the economic locomotive of Europe, Germany, will experience no growth for three consecutive years. In 2023 and 2024, the German economy has already seen a decline for two consecutive years.
In January of this year, the German government had forecasted a 0.3% economic growth for 2025, but this prediction has been significantly downgraded from the 1.1% growth forecast last autumn. The Ministry of Economic Affairs stated that the German economy is currently in "difficult waters," with economic policies facing "major challenges."
Habeck pointed out that due to U.S. President Trump's trade policies, global economic uncertainties have significantly increased. The consequence has been turbulence in the international financial markets and gloomy global economic growth prospects, which in turn have affected Germany's export-oriented economy, especially as overseas demand has already weakened.
No Significant Recovery in 2026
According to forecasts, no significant recovery is expected in the German economy by 2026, with the GDP expected to grow by 1.0%. The fiscal policies of the incoming federal government will release positive signals, but these effects will only significantly boost economic growth in the coming years.
Additionally, Germany’s inflation rate is expected to decrease from last year’s 2.2% to 2.0% this year, and further to 1.9% by 2026. Considering the persistently bleak economic outlook, the spring recovery in the labor market is relatively weak, with employment rates expected to decrease and unemployment rates expected to rise this year. Next year, the number of employed individuals is expected to increase, while unemployment numbers are projected to decrease.