Germany cuts economic growth forecast to stagnation for 2025

ISTANBUL

The German government has lowered the gross domestic product (GDP) forecast to 0% for 2025, the German economics daily Handelsblatt reported on Tuesday.

Previously in January, it had projected a 0.3% yearly growth for this year.

If the German economy enters into stagnation this year, it would mark the first time in history that would not grow for three consecutive years.

Meanwhile, for 2026, the country expects growth "around one percent," the government sources told Handelsblatt. In January, the federal government had forecast growth of 1.1%.

The continuing development of the German economy in the remaining eight months of the year is currently particularly difficult to predict due to the tariff policy of US President Donald Trump, according to the source.

The rate of a 10% tariff on all imports, together with the specific cases for steel, aluminum, and automobiles, is still in place even though he recently halted additional duties for the EU.

The new government forecast was affected by the tariffs as well as the German businesses performing worse than expected, according to the government sources.

The German companies are now delaying investments even further due to the uncertainty surrounding Trump's next course of action.

The GDP growth is likely to be substantially worse if Trump raises tariffs against the EU to 20% as initially intended.

Calculations by the Munich-based Ifo Institute and Kiel Institute for the World Economy suggest that the full tariffs might cause economic harm of about €13 billion (approximately $14.9 billion) this year by reducing GDP growth by 0.3 percentage points.

In this instance, the German economy might contract once more this year as the GDP had already decreased by 0.2% in 2024.