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Ifo Lowers Germany's 2025 Growth Forecast to 0.2%

Economic challenges tied to weak demand, global competition, and U.S. trade policies are driving the downgrade, with potential for improvement if domestic reforms succeed.

Baustelle am Berlin Alexanderplatz
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Overview

  • The Ifo Institute revised its 2025 German GDP growth projection from 0.4% to 0.2%, citing weak industrial demand and cautious business investment.
  • Political uncertainty in Germany and the U.S., including protectionist U.S. trade policies, adds significant economic risks.
  • Proposed German government reforms, such as loosening debt restrictions and a €500 billion investment plan, could improve growth if implemented effectively.
  • Alternative scenarios from Ifo suggest growth could reach 1.1% in 2025 with the right policy measures, but risks of further decline remain.
  • Inflation is expected to hold steady at 2.3% in 2025, while unemployment is projected to rise slightly to 6.2%.