INSUBCONTINENT EXCLUSIVE:
The forecast, released on April 24, 2025, slashes expected growth to zero, down from the 0.3% predicted just months earlier.Officials cite
trade policy and persistent structural weaknesses as the main drivers behind this unprecedented standstill
estimate these tariffs will reduce German GDP by 0.1 percentage points in both 2025 and 2026
production data confirms the malaise
Output fell 1.3% month-on-month in February 2025, driven by a 3.2% drop in construction, a 5.3% fall in food manufacturing, and a 3.3%
decrease in energy production.German Industry Stalls as Tariffs and Weak Demand Hit Core Sectors
(Photo Internet reproduction)Over the three months ending February, industrial output declined by 0.1%
Compared to a year earlier, industrial activity dropped by 4%
Energy-intensive industries, already struggling with high costs, saw output fall 0.6% in February alone.The construction sector,
traditionally a stabilizer, continues to shrink
Analysts expect a 0.5% real-term decline in 2025, marking the fifth consecutive year of contraction.High inflation, expensive materials, and
weak demand have pushed many firms toward insolvency
Residential construction remains the hardest hit, with new building permits and orders falling sharply.Germany Faces Economic Crossroads
Inflation has eased but remains above target.Consumer prices rose 2.2% year-on-year in March 2025, the lowest since November 2024
Service inflation slowed to 3.4%, while energy prices dropped by 2.8%.Core inflation, excluding food and energy, slowed to 2.5%
Rising real wages offer some relief, but business sentiment remains subdued
For the first time, more firms plan to cut jobs than to hire.Political uncertainty compounds these challenges
The collapse of the previous government in late 2024 left Germany without a clear policy direction
The new administration, expected to take office in May, faces the task of reviving growth while managing fiscal constraints.Planned
infrastructure and defense spending may help, but most economists see little chance of a quick recovery
domestic hurdles have combined to stall growth, leaving the country at a critical juncture
Only decisive action on trade, investment, and structural reform can alter this course.
