France and Germany are expected to face economic slowdowns in 2025, according to the OECD’s revised forecasts published on December 4. While external demand remains the main driver of growth in France, the OECD predicts that domestic demand will recover starting in 2025
In 2025, the OECD has revised its growth forecasts for France and Germany, lowering them by 0.3 points compared to September. France is expected to record a growth rate of 0.9%, while Germany will see a 0.7% increase in its GDP. This decline is attributed to both political and economic factors within the two countries.
However, global growth is projected to reach 3.3% in 2025, driven by a significant acceleration of the U.S. economy.
Budgetary Efforts Weigh on France’s Growth
For France, the efforts to reduce the budget deficit planned for 2025 and 2026 are expected to negatively impact growth. These measures are likely to partially offset the positive effects of monetary easing, which is anticipated to boost investments in residential housing and businesses.
External Demand as the Growth Driver
On the positive side for the French economy, external demand is expected to remain the main driver of growth for the second consecutive year. As for domestic demand, which was temporarily supported by private consumption during the third quarter of 2024 due to the Olympic Games, it is expected to pick up starting in 2025. This recovery will be bolstered by disinflation, which will help stimulate purchasing power.
Germany and the Energy Crisis
Germany, meanwhile, continues to struggle to recover from the impacts of the energy crisis triggered by Russia’s invasion of Ukraine. Following a recession last year, the German economy is expected to show zero growth in 2024 before modestly rebounding in 2025, according to the OECD’s forecast.