The IFO Institute only promises the German economy in 2025 only a mini growth of 0.2 percent. It was not until 2026 that the situation could improve somewhat with an increase in gross domestic product (GDP) of 0.8 percent, the Munich economists said on Monday. “The German economy is stuck,” said Timo Wollmerhäuser, head of the IFO business forecast. “Despite a recovering purchasing power, the consumer mood remains, and companies are also investing cautiously.” Especially the industry is suffering from weak demand and more international competitive pressure. At the same time, political uncertainties, in Germany and the USA, ensured great risks. The IFO institute expected 0.4 percent growth for 2025 in December and expected between 0.8 and 1.6 percent for next year – depending on the weakness of the industry and impulses of economic policy. Other leading German economic research institutes are even more skeptical for 2025 than the IFO, but more optimistic for 2026.MEXIO is the bottom of Germany. In the forecast of the Organization for Economic Cooperation and Development (OECD), only Mexico does worse in the group of 20 most important industrialized and emerging countries. For 2026, the OECD lowered its Germany forecast from 1.2 to 1.1 percent, but in the new forecasts, the huge financial package for defense and infrastructure, which was agreed by the Union and the SPD with the Greens, has not yet been taken into account. “If the financial package were decided, it would certainly have a significant impact on growth in 2026,” said the two OECD experts Isabell Koske and Robert Grundke of the Reuters news agency. This would increase public investments and stimulate private investments. “In 2025, however, the effects would be lower because the implementation of investment projects takes some time,” it said. However, uncertainty should decrease and the trust of investors and households should increase. Both can affect consumption and private investments in the current year. The new US government has taken on an erratic and protectionist economic policy, explained the IFO experts and government advisors. Already announced import tariffs on goods from Mexico, Canada and China as well as corresponding counter-tariffs have the first negative effects on the US economy and the global economy. If there are also European products, the German export industry could be sensitive. According to the Federal Ministry of Economics, the German export industry is currently continuing. “At the beginning of 2025, the economic situation is further shaped by high inner and foreign policy uncertainties,” says the ministry’s monthly report. This applies in terms of foreign policy, especially with a view to the “sudden US trade policy” and the perspectives of the Ukraine War-in terms of domestic policy with regard to the design and implementation of the financial policy plans of the Union and the SPD. “Although measures to strengthen the infrastructure and defense are under discussion, it is open whether and when they are implemented,” said the financial plans of the expected future coalition of the Union and SPD. According to IFO economic chief Wollmershäuser, this phase of uncertainty should quickly be overcome: “A reliable economic policy is essential to create trust and stimulate investments.” However, more on the Themautschland’s industry is increasingly drawing abroad for cost reasons, as can be seen from a survey by the German Chamber of Commerce and Industry (DIHK). Accordingly, high energy and labor costs, geopolitical uncertainties and a weak economy put companies under pressure and reduce the attractiveness of Germany. Of the approximately 1700 -active industrial companies surveyed, 40 percent planned investments abroad – an easy decline in the previous year (42 percent). It is no longer primarily a matter of opening up new markets, but above all about reducing costs. “Germany threatens to lose connection,” warned DIHK foreign manager Volker Treier. “If companies are increasingly wandering abroad because high energy costs, paralyzing bureaucracy and an increasing tax burden can be led on their air in this country, this is a dangerous signal.” In fact, according to DIHK, the motive for the investment abroad reached the highest value since the 2008 financial crisis. “We are at a turning point: Germany loses the ground as an investment location,” emphasized Treier. The economy has shrunk in 2023 and 2024. Should the third year of recession in a row became in 2025, it would be the longest economic dry spell since the Federal Republic was founded.
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