German Minister of Economics and Climate Protection Robert Habeck holds a graphic depicting the development of Germany's price-adjusted gross domestic product as he addresses a press conference to present the annual economic report 2025 at his ministry in Berlin on January 29, 2025. (Photo by Odd ANDERSEN / AFP)
Berlin: The German government on Wednesday cut its growth projections for 2025 amid domestic political instability and the looming threat of higher US tariffs under President Donald Trump.
Output is now expected to increase by only 0.3 percent this year, the economy ministry said in a report, down from its previous estimate of 1.1 percent made in October.
Europe's largest economy looks set to extend its run of poor performance in 2025, after it shrank in each of the past two years.
"Germany is stuck in stagnation," Economy Minister Robert Habeck told a press conference in Berlin.
The downward revision to the forecast was "mainly due" to the fact that measures intended to encourage growth were not fully implemented because of the collapse of the government, the report said.
The governing coalition between Chancellor Olaf Scholz's Social Democrats, the Greens and the liberal Free Democrats (FDP) fell apart last November over discord on budget questions.
The exit of the FDP from the coalition and the early end of the government paved the way for new elections, set to be held on February 23.
In the interim, the country's future economic policy has been left in limbo.
Scholz's rump government no longer has a majority to pass legislation, and it could take many weeks after voting day for a new government to be formed.
In addition to political uncertainty in Germany, the risks to trade had "increased significantly" because of potential changes in US policy, the report said.
Trump, who returned to the White House this month, has threatened to increase tariffs on key trading partners including the European Union.
