29.01.2025 11:13
The German Industry Federation has predicted that Germany's economy will contract by 0.1% in 2023. Emphasizing that the economic problems stem from structural weaknesses, the BDI President expressed the urgent need for reform, stating, "We are in a deep economic crisis."
In Germany, industrialists have stated that the country's economy is in a deep crisis, predicting that Europe's largest economy will shrink by 0.1% this year. The President of the German Industry Federation (BDI) published growth forecasts and assessments for the economy for this year. Accordingly, industrialists expect Germany's gross domestic product (GDP) to decline by 0.1% this year, independent of the additional tariffs planned by U.S. President Donald Trump. The BDI predicts that the Eurozone will grow by 1.1% this year, while the global economy is expected to grow by 3.2%, noting that Germany will lag behind the Eurozone economically.
"GOVERNMENTS HAVE POSTPONED IMPORTANT REFORMS FOR YEARS"
BDI President Peter Leibinger stated at a press conference that Germany is in a deep economic crisis, saying, "The situation is very serious. Especially, growth in the industry has experienced a structural break." Leibinger pointed out that the current economic crisis in Germany is not solely a result of the COVID-19 pandemic and the Russia-Ukraine war, stating that the problems are domestically sourced and are a result of the "structural weakness" that the economy has been struggling with since 2018. Peter Leibinger remarked, "Governments have postponed important reforms for years, delayed investments, and settled for the current situation. There is an urgent need for public investments in modern infrastructure, the transformation of our economy, and resilience."
Leibinger called for a clear strategy to reduce excessive bureaucracy in Germany, invest in infrastructure, lower energy prices, and strengthen the German innovation and research environment, stating, "Germany is at a crossroads. The problems are significant but not insurmountable. We have a strong foundation to build upon. Our companies need a federal government that will make decisions with determination, strength, and confidence to put Germany back on the path to success as an industrial center."
"NEW TARIFFS COULD DEAL A HEAVY BLOW TO GERMANY AND THE EU ECONOMY"
Leibinger emphasized the importance of Europe becoming more strategically independent, stating: "We must use our negotiating power to effectively represent our economic interests and form alliances for greater European integration and competitiveness." He added that the European Union (EU) needs to know where it wants to go, and this includes Germany leading with an ambitious economic policy agenda."
Leibinger also referred to Donald Trump's return to the White House and threats of tariffs, warning, "We are on the brink of a radical change. The tone is becoming increasingly harsh, and new tariffs could deal a heavy blow to the German and EU economies." Meanwhile, according to the BDI, the additional tariffs planned by Trump could suppress the EU's economic growth, causing the export-oriented German economy to shrink by 0.5% instead of 0.1% in 2025.
GERMAN ECONOMY ON THE BRINK OF RECESSION
On the other hand, the German economy recorded a contraction for the second consecutive year last year due to increasing competition from China and structural problems that have hindered the economy. If the economy, which shrank by 0.1% in the last quarter of last year, also contracts in the first quarter of 2025, it will enter a technical recession, defined as two consecutive quarters of contraction. If Germany's GDP declines by 0.1% this year, as per the BDI's forecast, it will mark the first time since the reunification of Germany in 1990 that the largest economy in Europe has not grown for three consecutive years.
POLITICAL UNCERTAINTY FUELING THE CRISIS
Analysts indicate that political uncertainty, increasing competition from abroad, high energy costs, and still high interest rates are putting pressure on the German economy, expecting only slight growth for 2025. Due to disagreements on how to revive the economy, particularly regarding the budget, the three-party coalition government collapsed in November 2024. Early elections will be held in the country on February 23. Meanwhile, Trump, who began his presidential term on January 20, announced that he would significantly increase tariffs to reduce the trade deficit and support domestic production.
TRUMP HAS BECOME A SOURCE OF CONCERN IN EUROPE
Analysts note that Trump's more protectionist policy through tariffs on EU imports is not a good sign for the export-driven German economy. The U.S. is the largest buyer of German goods, with Germany exporting about 10% of its exports to the U.S.