In brief
The three-party government led by Olaf Scholz as chancellor is unpopular, given in-fighting between the coalition partners and poor economic performance. The Constitutional Court's ruling in November that off-budget spending plans violated the country's debt brake has forced the government into a tighter fiscal stance, curtailing its ambitions to address structural economic challenges. The opposition Christian Democratic Union (CDU) is set to benefit, alongside the far-right, anti-immigration Alternative for Germany (AfD), which now comes second in most opinion polls. We expect Germany to be the slowest-growing large economy in the world in 2024, after a GDP contraction in 2023. Over the longer term the green transition threatens Germany's large automotive sector, while the country's poor demographics weigh on long-term growth.
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Economic growth
(% unless otherwise indicated) | |||
2023 | 2024 | 2025 | |
---|---|---|---|
US GDP | 2.5 | 1.8 | 1.6 |
Developed economies GDP | 1.5 | 1.4 | 1.6 |
World GDP | 2.5 | 2.4 | 2.6 |
World trade | -0.3 | 2.4 | 3.3 |
Source: The Economist Intelligence Unit |