Ifo Institute cuts 2025 German economic growth forecast to 0.2%

On Monday, Germany's Ifo Institute revised its economic growth forecast for Germany downward to 0.2%, citing a decline in consumer sentiment. Some improvement is anticipated in 2026, with Ifo representatives projecting growth of 0.8%.

Last December, the institute forecasted a 0.4% increase in Germany's GDP for 2025, provided the government fails to address the economy's structural issues.

As future German Chancellor Friedrich Merz stated, he has secured the support of officials for a significant increase in government borrowing. According to the politician, this move will help stimulate the recovery of the national economy.

Last year, Germany was the only G7 country to experience two consecutive years of slowing GDP growth. The industrial sector, in particular, is grappling with international competition as well as risks tied to political instability in the US, according to Ifo.