Germany: IMF Forecasts Around 0.3% Economic Growth in 2025
Car sales, including electric vehicles, are falling
Following the economic recession recorded in Germany in 2024, the German economy is expected to grow by 0.3% in 2025 and “accelerate” to +1.1% in 2026. These are the forecasts released on January 17 by the International Monetary Fund (IMF), marking a “finally positive” outlook for German GDP after estimates of a 0.2% contraction for the year that just ended.
One very distinctive indicator that describes well the situation of the German economy is the number of “building permits,” which in November 2024 (latest available data) decreased by 13% to a total of 17,900, compared to the same month of the previous year. According to the German Federal Statistical Office (Destatis), “in recent years, the sharp rise in interest rates and construction prices has made it much more difficult to finance construction projects.” Destatis analysts emphasized in their report that “bureaucratic rules have played a role in overwhelming both authorities and investors. Regulation of rental markets has done the rest,” the Destatis report said, emphasizing that at this point, “there is no sign of the trend changing.”
The IFO Institute for Economic Research also found in December 2024 that 53.6% of German construction companies complained about a shortage of orders: “Structural problems in housing construction persist. The new federal government will face major challenges in creating much-needed living space,” said IFO’s Klaus Wohlrabe (pictured).
Meanwhile, alarming statistics continue to emerge about the state of the German automobile industry. German automaker Volkswagen sold just over 9 million vehicles in 2024, down 2.3 percent from the results recorded in 2023. In a press release, Volkswagen wrote that “the decline in sales was particularly noticeable in China (-10 percent), while in Europe the decline was 0.4 percent.” In North and South America, the automaker recorded sales growth of 6 and 15 percent, respectively. Volkswagen is concerned about the steady decline in electric vehicle sales, which in 2024 dropped by 3.4% compared to 2023.
As for luxury cars, sales of cars from German automaker Porsche (part of the Volkswagen group) in China plummeted 28% compared to the previous year. “Due to the crisis in the real estate market and the weak economy,” Porsche writes in a press release, “affluent Chinese customers are hesitant to make luxury purchases.” Last October, Porsche announced that it would “reduce its dealer network in China due to continued weak demand.”
The situation was similar for German automaker BMW, which in 2024 managed to sell 2.45 million vehicles of its main brand, as well as Mini and Rolls-Royce, which is 4% below the results announced in the previous year. Unlike Volkswagen, BMW has managed to count on a 13.5% increase in electric car sales, which is contrary to competitors’ trends.
Unsold Volлswagen cars in China
