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GermanyThe new government said on Wednesday that it hopes EuropeThe largest economy to see minimal growth of 0.2% this year, with forecasts for 1.3% growth next year and 1.4% in 2027.
The outlook for 2025 is slightly higher than the previous government’s forecast at the end of April for zero growth this year, expanding to 1% in 2026.
The German economy has shrunk for the past two years and has not seen significant growth for a very long time. Chancellor Friedrich Merz’s government has made it a priority since taking office in early May.
Economy Minister Catharina Reich said in a statement that “we need to act, now” on competition and innovation. He said a significant part of the expected growth would come from plans for higher government spending, and even that would only be effective if investments were made quickly – requiring fast planning and approval processes, something Germany has so far lagged behind.
“To secure long-term growth, we must eliminate the reform backlog—reducing energy costs, promoting private investment, reducing tax burdens that are high by international standards, dismantling bureaucracy, opening markets and enabling innovation,” he said.
Merz’s government has launched a program to encourage investment and set up a 500 billion-euro ($584 billion) fund to inject money into Germany’s crippling infrastructure over the next 12 years. It is promising to cut red tape and speed up the country’s lagging digitalisation.
A group comprising dozens of companies agreed in July to invest at least 631 billion euros in Germany over the next three years, a figure that included some previously planned investments but was designed to send a signal of confidence in the economy.
Germany expanded world trade in exports and engineered products such as industrial machinery and luxury cars for years. But it is suffering from increasing competition Sugar Companies are at risk, along with a number of other factors, including US President Donald Trump’s tariffs and trade threats.