Customs shock in Germany deemed less intense; IWF adjusts 2025 projection upward - Modified Forecast for Germany's Economy in 2025: Less Pronounced Impact From Tariff Adjustments
The International Monetary Fund (IMF) has slightly revised its forecast for Germany's economic growth in 2025, projecting a growth of approximately 0.1%. This revision comes as a result of lower-than-expected US tariffs and more favourable US-EU trade conditions, which have eased trade uncertainties and tariff shocks.
According to the IMF's July 2025 World Economic Outlook Update, the revised forecast for advanced economies, including Germany, is 1.5% overall growth in 2025. This positive revision is attributed to factors such as a reduction in effective US tariff rates compared to previous expectations, trade agreements with the EU entailing lower tariffs than originally feared from the US side, improved financial conditions, and fiscal stimulus measures in major economies, including Germany.
The IMF's Chief Economist, Pierre-Olivier Gourinchas, has observed that the "tariff shock" from US trade policies is less severe than initially projected. Additionally, some German economic institutes have raised their growth forecasts, citing improved business sentiment and manageable consequences from the US-EU trade situation.
In a broader context, the IMF now expects the global economy to grow by 3.0% this year, 0.2 percentage points more than previously expected. The US economy is expected to grow by 1.9% this year, 0.1 percentage points more than initially expected by the IMF since the announcement of the first Trump tariffs.
It's important to note that the US-EU trade agreement, announced on Sunday, is not yet reflected in the IMF's figures. The IMF still sees significant uncertainty due to US President Donald Trump's trade policies.
| Aspect | Details | |----------------------------|-----------------------------------------| | IMF 2025 Germany growth | Revised upward to about 0.1% | | Reason for revision | Lower-than-expected US tariffs, improved US-EU trade conditions | | Broader context | Global growth forecast raised to 3.0% (2025); advanced economies expected to grow 1.5% | | Additional factors | Fiscal stimulus, weaker USD, improved German business sentiment |
Sources: [1] IMF World Economic Outlook Update, July 2025 [2] Financial Times, "IMF raises global growth forecasts" [3] Reuters, "IMF upgrades global growth outlook" [4] The Wall Street Journal, "IMF sees less severe tariff shock than initially projected"
- The revised employment policy in EC countries, such as Germany, could potentially benefit from the positive revisions in the economic growth forecast, given the close relationship between economic growth and employment indicators.
- The ongoing trade discussions between the US and EU have significant implications for business and politics, as more favorable trade conditions may lead to job creation and investment opportunities in EC countries, thereby influencing their employment policies.
