Revised 2025 forecasts for German economy show next to no growth

The Organization for Economic Cooperation and Development (OECD) said the German economy is in even worse shape than previously predicted, with this year's growth now seen at 0.4%, down from a 0.7% forecast seen in December.

Out of the economies surveyed, only Mexico is expected to post weaker growth, the Paris-based OECD said.

Germany is just one of many countries following the trend in the global economy, which the report said is being significantly affected by the trade conflicts surrounding the US government.

Together with geopolitical conflicts, this is creating a climate in which companies are investing less and consumers are holding on to their money.

Ifo researchers also blame US

In Munich, the ifo economic research institute lowered its forecast for the German economy for this year to 0.2% from its previously predicted 0.4% increase.

For next year, ifo economists see only a marginal improvement in gross domestic product (GDP) of 0.6%. The figures are price adjusted.

Like the OECD, the institute said political uncertainties, both in Germany and in the United States, are creating considerable risks, the institute said.

Timo Wollmershäuser, head of economic forecasts at ifo, called the economic policies of the new US government "erratic," and that is not helping the already troubled German economy.

"The German economy is treading water. Despite a recovery in purchasing power, consumer sentiment remains subdued, and companies are also reluctant to invest," said Wollmershäuser. Industry is suffering from weak demand and increasing international competitive pressure.

Things could get better

The closely watched forecast however does not include the current plans of the likely future government, Wollmershäuser explained. These plans have not been finalized so their effect is unclear.

However if implemented, there is a significant upside that could improve growth especially for next year but also this year.

Several mainstream parties, including the Christian Democratic Union of likely future chancellor Friedrich Merz, have agreed to relax the country's constitutional debt limit and enact a €500 billion ($545 billion) plan for investments in infrastructure and climate protection.