The international political environment has fundamentally changed with looming trade wars and a deteriorating security situation in Europe. The leading parties in Germany are setting the stage for debt-financed additional defence tasks with far-reaching changes to the debt brake. This entails major risks for the German economy, but also opportunities.

Meanwhile, the economy continues to be in a downturn. According to the spring forecast of the Halle Institute for Economic Research (IWH), gross domestic product (GDP) in 2025 is likely to be roughly the same as in the previous year, and it will not increase significantly until 2026, partly because uncertainty about German economic policy is likely to decrease after the new government is established, meaning that the savings rate of private households will fall again somewhat and the debt-financed additional government spending will gradually have an impact on demand.

The IWH economists are forecasting an increase in GDP of 0.1% for 2025. In December, they were still forecasting growth of 0.4% for 2025. The outlook is similar for East Germany, where production is likely to have increased slightly in 2024, unlike in Germany as a whole.

The announcements and decisions made by the new US administration, particularly regarding its position in the Russia-Ukraine conflict and its tariff policy, have led to high uncertainty worldwide and recently caused US share prices to fall significantly. Meanwhile, the global economy is likely to have continued expanding moderately during winter. The economy remained robust in the US, but weak in the euro area. In the US, the negative effects of economic policy uncertainty and higher tariffs are likely to roughly balance out the short-term positive effects of deregulation. In China, the property crisis is continuing for the time being, while the success of the DeepSeek chatbot app has improved the outlook for the Chinese tech sector. In the euro area, the economy will remain weak in 2025.