Economic crisis: OECD sees Germany as bringing up the rear in terms of growth in 2025

According to a forecast by the OECD, Germany will be at the bottom of the industrialized countries in terms of economic growth next year. The Organization for Economic Cooperation and Development (OECD) announced in Paris that growth of just 0.7 percent is expected for Germany in 2025. In 2026, however, growth of 1.2 percent is expected.

The industrialized nations organization once again revised its forecast for German economic growth downwards. The OECD had already slightly lowered its forecast for Germany in September and predicted an economic increase of 1.0 percent for 2025. The OECD economic experts expect stagnation in Germany in the coming year. The federal government expects the economy to shrink slightly.

Weak Chinese business is slowing the German economy

OECD economist Isabell Koske cited weak exports to China as one reason for the weak economic situation, which means that Germany has stronger trade links than other countries. In addition, competition from Chinese manufacturers is also causing problems for German industry, especially in the automotive sector, Koske told the dpa news agency in Paris.

According to the current business climate survey by the German Chamber of Commerce Abroad (AHK), German companies in China are more pessimistic than ever about the near future due to the economic problems in the country and numerous hurdles. Only just under a third of the companies surveyed expect positive developments for their industry in the People’s Republic in the coming year – a historic low.

Debt brake inhibits growth

Another reason for the weak growth in Germany is the more restrictive fiscal policy in Germany compared to other EU countries with the reinstatement of the debt brake, said Koske. However, this has recently also contributed to a sharp decline in inflation. Uncertainties about the financing and implementation of more climate-friendly production would have further depressed the confidence of investors and consumers in Germany, as would the political uncertainties in view of an early federal election.

The OECD expert advised a future government to create clarity in the financing and implementation of the green transformation. The OECD is in favor of reforming the debt brake to create more space for investments. Removing environmentally harmful subsidies, such as the company car privilege or the diesel subsidy, could also help finance the transformation, said Koske.

Robust global economy

Globally, the OECD expects economic growth of 3.3 percent next year and also in 2026, although the outlook varies greatly depending on the region. In the euro area, an increase of only 1.3 percent and 1.5 percent is expected. For the USA, however, growth of 2.8 percent is forecast next year before slowing to 2.4 percent in 2026. In China, an increase of 4.7 percent is predicted in 2025 and 4.4 percent in 2026.

“The global economy has proven resilient. Inflation has continued to decline and has moved closer to central banks’ targets, while growth has remained stable,” said OECD Secretary General Mathias Cormann. However, there are ongoing uncertainties. An intensification of conflict in the Middle East could disrupt energy markets and hit confidence and growth. Rising trade tensions could hurt growth.

Growth spurt also possible

On the other hand, a growth spurt is also conceivable if purchasing power recovers faster than expected and consumer confidence improves, the OECD explained. An early resolution of the major geopolitical conflicts could also improve sentiment and reduce energy prices.

The Paris-based Organization for Economic Cooperation and Development (OECD) brings together countries that are committed to democracy and a market economy. In addition to large economies such as Germany, the USA and Japan, emerging countries such as Mexico and Chile are now members.