German Economy Forecast to Grow Just 0.1% in 2025, IfW Says
Germany’s economy is expected to see only marginal growth this year, with gross domestic product (GDP) rising by just 0.1% after two consecutive years of contraction, according to new forecasts from the Kiel Institute for the World Economy (IfW).
The think tank noted that business sentiment has slightly improved on expectations of higher government spending. However, U.S. tariff policies continue to weigh on Germany’s export-driven economy.
From 2025 onward, Berlin is set to use newly available public funds, which could lift GDP growth by around 0.6 percentage points next year and provide an additional, though smaller, boost in 2027.
According to the IfW forecast, German GDP is projected to expand by 1.3% in 2026 and 1.2% in 2027. Alongside this recovery, unemployment is expected to decline gradually, falling from 6.3% in 2025 to 5.8% by 2027. At the same time, Germany’s budget deficit is forecast to widen, climbing from 2% of GDP in 2024 to 3.5% by 2027.
