The German government raised its growth forecasts on Wednesday, saying it expects economic growth to avoid stagnation in 2025 before enjoying more pronounced growth in 2026.
The last government estimate in April had predicted zero growth in 2025 for Europe’s largest economy, but this has been upgraded to 0.2%, raising the forecast for 2026 from 1% to 1.3%.
“After two years of shrinking economic performance, a modest, low-level recovery is expected in autumn 2025,” a government statement said.
“By the end of 2025/26, domestic economic mobility should pick up pace, supported by the fiscal and economic measures taken by the federal government.”
Development comes from state financing
For 2027, Germany is also predicting 1.4% growth.
“A large part of the growth in the coming years will be the result of higher state financing, notably special funds for infrastructure investments and increased investment in defence,” Economy Minister Catharina Reich said in presenting the projections at a news conference on Wednesday.
However, government projections have also been criticized for being essentially financed by public borrowing.
Reich also pointed to the need to lower energy prices and lower taxes to spur further growth.
“We need the courage to make decisive reforms,” he said.
Germany’s manufacturing sector is struggling under the impact of high energy prices, fierce foreign competition and new US tariffs on EU products.
Earlier on Wednesday, official data showed a sharp decline in industrial output in August, especially in the automotive sector, which faces tough competition, especially from China.
Edited by: Wesley Rahn