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Business sentiment in Germany has taken a sharp downturn. Businesses have plunged into pessimism, with less than 13% of German companies expecting an improvement in 2025. A sense of overwhelming hopelessness seems to have gripped the nation.
According to the Ifo Institute for Economic Research, many German businesses (31.3%) are worried about a worsening economic situation in 2025. Only 12.6% are hopeful for an improvement, while the majority of firms (56.1%) have no expectations for changes in the economic environment.
Ifo highlights that nearly every sector of the German economy is deeply pessimistic. In particular, the construction industry is the most dispirited, with half of the companies fearing a further downturn. Pessimism is also prevalent in the retail sector, where 42.1% of businesses predict worsening conditions.
Among manufacturing firms, only 15.7% are optimistic, hoping for an improved business climate next year, while 31.8% foresee a deterioration. The services sector has a slightly more positive outlook, with nearly 12% of companies expecting progress, though 28.2% still hold a negative view.
Some experts have even warned that the German economy may be approaching a point of no return. Among the primary reasons for this decline, analysts point to an ongoing energy crisis, partly caused by the country’s shift away from affordable Russian energy resources. Another key factor contributing to the situation is the inability of Germany's auto giants to effectively compete with China’s automotive industry.
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