The energy crisis and rising production costs, while exports and business confidence are falling, are said to be the challenges Germany must overcome.
The German economy is expected to shrink by 0.3% this year, according to the German Chamber of Commerce and Industry (DIHK), and concerns are widespread across sectors. Despite some optimism in manufacturing and construction, overall investor sentiment remains fragile due to the negative impact of many factors.
Exports, a key driver of the German economy, will be under great pressure from the high tariffs imposed by the US. DIHK forecasts that German exports will fall by 2.5% in 2025, marking the third consecutive year of decline. Meanwhile, the auto industry is in crisis with sales plummeting. Major manufacturers in the industry have announced that they will close factories and lay off workers, causing deep concern among politicians .
According to economic experts, the German auto industry has been hit hard by the Covid-19 pandemic. The recovery of the industry continues to be delayed due to the continuous disruption of the supply chain after the pandemic, while the Russia-Ukraine conflict has increased costs and pushed up energy prices. The slow pace of technological innovation has also weakened competitiveness against strong rivals, especially cheap electric vehicles from China. If US President Donald Trump imposes more tariffs on imported cars and triggers a wider trade war, the German auto industry will continue to suffer a heavy blow.
High energy prices have been a major complaint among German manufacturers and businesses in recent times, as they face rising production costs that reduce competitiveness and squeeze profits. Of the energy-intensive companies, 71% are struggling with high energy and raw material prices. This has affected many key German industries, including automobile manufacturing, steelmaking and chemicals. Many manufacturing plants have had to close temporarily or permanently.
Pessimism remains prevalent among businesses, with surveys showing that nearly a third of companies plan to cut back on investment. A DIHK survey of 23,000 companies across a range of sectors and regions found that 29% of respondents expect exports to continue to decline over the next 12 months, with only 19% expecting an increase. As for challenges ahead, 59% of companies cited economic policy uncertainty, followed by weak domestic demand (57%) and record high labor costs (56%).
Faced with economic risks, Germany's new coalition government led by Chancellor Friedrich Merz has just announced a series of measures to stimulate growth, including: Reducing electricity taxes and expanding depreciation allowances to boost business investment; establishing a multi-billion euro infrastructure investment fund and speeding up approvals for energy projects; abolishing national supply chain laws and simplifying administrative procedures. In addition, Economy Minister Katherina Reiche has called on the European Union to approve subsidies for Germany's heavy industry to reduce energy costs and increase competitiveness.
In addition to these measures, the German government needs to quickly come up with a strategy to manage growing global uncertainties. One of the most worrying issues for German companies today is the unpredictable foreign policy moves of US President Donald Trump and potential trade wars that could seriously disrupt the global economy.
The German economy is at a critical crossroads. Meeting the current challenges will require a close coordination of fiscal policy, structural reforms and international cooperation. The decisions made in 2025 will shape Germany’s economic future for years to come. Without strong structural reforms, Germany risks “deindustrialization” and losing its position as Europe’s leading economy.
(According to Politico, AA, DIHK)
Source: https://hanoimoi.vn/kinh-te-duc-doi-mat-voi-nhieu-thach-thuc-704083.html
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