BERLIN, Jan. 29 (Xinhua) -- The German government on Wednesday lowered its economic growth forecast for 2025, expecting Europe's largest economy to expand by 0.3 percent, instead of the previously projected 1.1 percent. The revision underscores the persistent challenges facing Germany's sluggish economy amid ongoing external and structural pressures.
The fall is partly attributed to the collapse of the country's ruling "traffic light coalition," including the Social Democratic Party (SPD), the Greens, and the Free Democratic Party (FDP), which has led to the suspension of growth stimulus initiatives, according to the annual economic forecast report released by the Federal Ministry for Economic Affairs and Climate Action.
Meanwhile, heightened uncertainties over the economic and trade policies of the Unites States (U.S.), along with the upcoming elections in Germany, are further weighing on the already fragile growth outlook, the report said.
"The German economy is in a difficult position at the start of 2025," Minister of Economics Robert Habeck said.
Global challenges, including escalating geopolitical tensions and the energy crisis, have hit the industrial and export-reliant economy hard, Habeck added, while also pointing to fundamental structural problems as key domestic obstacles.
Reforms urged by the report include targeted investment incentives, cutting red tape, and improvements in domestic education and immigration policies to address skilled labor shortages.
Looking ahead, the report expects that a recovery of investment and private consumption could help boost economic growth from the second half of the year. However, foreign trade -- a pillar of Germany's economy -- is expected to continue struggling, with exports set to decline while imports will rise.
The German economy contracted by 0.2 percent in 2024, marking the first back-to-back decline since the early 2000s. ■
