Germany expects economic stagnation in 2025 as coalition collapse stalls reforms

Germany's economy ministry expects the country's GDP to rise 0.3 percent in 2025, according to its annual report. A report from autumn put growth at 1.1 percent, however, the break-up of the coalition government meant that measures in the 'growth initiative' meant to stimulate the economy could not be implemented to a large extent, economy minister Robert Habeck said.

The dispute over how to revive Germany's stagnating economy contributed to the collapse of the coalition government in November. "The German economy is in a difficult starting position at the beginning of 2025," he said. "The global crises of recent years have hit our industry- and export-oriented economy particularly hard." In particular a shortage of skilled workers, excessive bureaucracy and low private and public investment were indicators of Germany's fundamental structural problems, Habeck added.

The expansion of power grids and renewables, which had reached record levels in 2024, as well as the build-up of Germany's liquefied natural gas (LNG) terminals should serve as examples of reduced bureaucracy and accelerated planning procedures for other sectors, the ministry wrote.

Energy industry association BDEW said the crises in the past years had particularly affected the competitiveness of German industry. "The measures mentioned in the report to reduce bureaucracy are not nearly sufficient," said BDEW head Kerstin Andreae. She added that steps to reduce energy costs were also dearly needed.

In contrast to many other major economies, Germany's economic performance slightly shrank for the second year in a row in 2024. The country will head to the polls on 23 February, with economic recovery being a top priority for voters following the topic of migration, according to polls.