Five major economic hurdles Germany needs to overcome in 2025

Germany's economy, once considered the powerhouse of Europe, is now navigating an era of stagnation and structural challenges. 

With growth projections among the weakest in the developed world, the country faces significant hurdles in 2025, ranging from economic stagnation and geopolitical tensions to the need for a strategic overhaul in key sectors.

Here are the top five challenges with which the German economy will have to contend.

The German economy has seen virtually no growth since late 2019. 

Growth projections for 2025 remain bleak, with real GDP expected to expand by a mere 0.3%, according to Goldman Sachs. The Bundesbank projects an even more tepid 0.2% increase, while the Kiel Institute forecasts outright stagnation at 0.0%.

Underlying this stagnation is a confluence of weak exports, sluggish private consumption, and faltering investments. 

Decarbonisation, digitalisation, and demographic shifts are exerting downward pressure on potential output, leaving analysts questioning whether Germany’s malaise is a temporary weakness or a structural adjustment. 

Professor Timo Wollmershäuser from the ifo Institute recently noted: "At the moment, it is not yet clear whether the current phase of stagnation is a temporary weakness or one that is permanent and hence a painful change in the economy." 

Germany's early federal elections, scheduled for February 2025, bring heightened economic and political uncertainty. 

Investors are watching closely to see if a new government will leverage Germany's substantial fiscal capacity to stimulate growth. 

Despite Germany's substantial fiscal capacity, with one of the lowest debt-to-GDP ratios among major advanced economies, the constitutional "debt brake" limits public borrowing.

Yet, there