Robert Havec, the Minister of Economy and Climate Affairs and Greens, will arrive at the Federal Cabinet meeting held in Berlin, Germany on January 29, 2025.
Sean Gallup | Getty Image Znow | Getty Image
On Wednesday, the German government has reduced the total domestic production forecast of 2025 to only 0.3 %.
According to a CNBC translation, “the diagnosis is serious,” said Robert Havec, the Minister of Climate, said at a press conference. He said that while there were several positive developments, such as an increase in credit demand, “Germany is stagnant.”
The latest GDP estimation has declined significantly from the prediction of 1.1 % of this year’s growth rate, but is significantly reduced to the predictions from other economic organizations. Earlier this month, the International Currency Fund has reduced the outlook and has been seeing 0.3 % of the German economy this year, but the Federal Committee in December expects that GDP will increase by 0.2 % during the period. I did it.
In contrast, the German Industrial Association on Tuesday will be reducing the national economy by 0.1 % in 2025 and will decrease the third year.
Annual GDP, announced earlier this month, indicated that the German economy had a 0.2 % contract in 2024 after reducing 0.3 % in the previous year. The GDP value for each quarter has also slowed down, but so far, the technical recession, which is characterized by two -thirds of shrinkage, has been avoided.
Habeck stated that some important reasons supported the Revision of GDP prediction. Among them, there are the fact that the current government’s growth initiative plan could not be fully implemented due to the premature end of the administration’s term, and the results of the future elections. Havec also quoted geopolitical uncertainty following the return of President Donald Trump and the possibility of tariffs on European countries.
With a look ahead, the domestic economy is likely to be weak this year only due to continuation of geopolitical uncertainty and the lack of clarity in the economic and financial direction of the new government. The German Ministry of Economy stated in a statement. 2025 Economic Report.
It was assumed that the economy would increase as the inflation declined. It was assumed that real income would increase and the economic situation would be more clear.
Habeck pointed out that 1.1 % GDP growth was expected in 2026.
Germany will head to the federal election on February 23. The election is performed earlier than initially planned after the state ruling coalition was disassembled in November.
Structural issues
Habeck, who repeatedly commented from the Finance Minister of Finance to the CNBC last week, said Germany was suffering from structural issues on Wednesday. In a statement on Wednesday, he pointed out the shortage of workers and skilled workers, enthusiastic bureaucrats, and weak investments.
The Minister of Finance has added that Germany is systematically undergoing under investment, and restricted fiscal policy is weakening growth.
Preliminary reading of GDP in the fourth quarter of Germany is scheduled for Thursday. Earlier this month, the Statistics Bureau of the country said that the economy was 0.1 % in three months until the end of December, based on the information available at the time.
In addition, the economic report on Wednesday has been fixed to 2.2 % this year. The German consumer price index has fallen below 2 % of European Central Bank’s goals at the end of the summer, but has risen again since then.
