German economy
Government expects mini-growth in 2025 – stronger growth in 2026
Germany’s economy is languishing. Next year the tide should turn. In order for things to improve in the long term, further steps are necessary, said the Economics Minister.
The federal government sees signs of an improvement in the economic situation: Economics Minister Katherina Reiche (CDU) expects mini-growth of 0.2 percent for the current year. Next year, things are expected to improve significantly, with expected growth of 1.3 percent. The federal government is expecting growth of 1.4 percent for 2027.
German consumers should bring growth
The German economy has been in an economic slump for a long time. Economic output has shrunk in the past two years.
It is not global trade that should bring the hoped-for growth to the export-strong German economy, but rather domestic demand. According to the federal government, stable prices, wage increases and relief will increase the disposable income of private households in the coming years. It also assumes higher employment.
All of this is intended to encourage people to spend more money. The expectation is that billions in government spending on infrastructure, climate and defense will also give the economy a boost.
Rich: Break down the reform backlog for longer-term economic growth
Minister Reiche pours water into the wine. “The economic outlook should not obscure the fact that a significant part of the growth in the coming years will probably come from high government spending – such as special funds and defense investments,” she said.
But this will only be effective if rapid planning and approval procedures make investments possible quickly. “In order to secure long-term growth, we have to resolve the reform backlog: reduce energy costs, promote private investments that address high taxes and fees compared to international standards, reduce bureaucracy, open markets and enable innovation,” says the CDU politician.
The risks
It is uncertain whether the German economy will actually gain momentum. The federal government has identified the “erratic trade and security policy of the USA” as well as counter-reactions from trading partners as a risk factor. An escalation of crises and unexpectedly severe economic downturns in Germany’s important trading partners could also dampen the recovery, according to the government.
US President Donald Trump offended the EU and other trading partners with high tariffs, but then toned down some of his original announcements.
The government’s expectations coincide with those of institutes
The government’s forecast is in line with that presented by leading economic research institutes two weeks ago. They expect growth of 0.2 percent for the current year, 1.3 percent for 2026 and 1.4 percent for 2027. They also warn that the state cannot stimulate the economy in the long term given structural problems.
DPA
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Source: Stern
