Germany's Economic Outlook Dimmed by Geopolitical Tensions

The German economy is poised to face challenges in 2025, with exports expected to decline by 0.3% due to weakening competitiveness and geopolitical tensions. Imports are anticipated to rise by 1.9%. The situation is exacerbated by potential tariff threats from the U.S. and a governmental collapse leading to snap elections.

Germany's economy is bracing for a challenging 2025 as exports are projected to drop by 0.3%, a consequence of waning competitiveness and escalating geopolitical tensions, according to the annual economic report cited by Reuters on Wednesday.

The looming threat of new tariffs under the potential return of U.S. President Donald Trump has European governments on high alert. Germany's BDI industry association warns that Trump's tariff policies could shrink Germany's export-driven economy by nearly 0.5%.

Additionally, the report reveals a modest growth expectation of 0.3% for Europe's largest economy this year, with inflation steady at 2.2% in 2025. Unemployment is anticipated to rise to 6.3%. Economy Minister Robert Habeck is set to present the report amidst political upheaval and the upcoming February 23 elections.

(With inputs from agencies.)