German Government Slashes 2025 Forecast Before Snap Election

(Bloomberg) -- The German government chopped back its growth forecast for this year to 0.3% from 1.1%, the latest sign Europe’s biggest economy remains mired in a prolonged period of stagnation.

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Economy Minister Robert Habeck — who’s running as the lead candidate for the Greens in next month’s snap election — blamed the weakness on “global crises of recent years” that he said has “hit our industrial and export-oriented economy particularly hard.”

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While inflation stoked by the energy crisis has receded and households have more money to spend, Germany’s “fundamental structural problems” such as a shortage of skilled workers, excessive bureaucracy and lack of investment are weighing heavily on growth, Habeck said Wednesday in an emailed statement.

“The German economy is in a difficult starting position at the beginning of 2025,” he added.

The government economists in Berlin are aligning their predictions with similarly gloomy forecasters, including the Bundesbank, which expects meager growth of 0.2% this year.

Germany’s BDI industry lobby predicts an even bleaker scenario, and expects GDP to shrink by 0.1%, which would be a third straight year of contraction.

While the economy will pick up in 2026, its performance will still be weaker than previously anticipated. Habeck revealed the new projection for next year is now 1.1% growth, down from a prior outlook of 1.6%.

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More evidence of persistent economic underperformance is bad news for Social Democrat Chancellor Olaf Scholz with less than a month to go until the Feb. 23 national ballot.

Germany is grappling with a raft of challenges, including Donald Trump’s return to the White House and the prospect of him imposing additional trade tariffs that could harm the country’s key export sector.

“The current high level of uncertainty regarding US economic and trade policy, as well as the unpredictability around the future economic and financial policy course before the election are damping investment and consumer sentiment,” Habeck said.

(Updates with 2026 forecast in seventh paragraph)

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