Germany just missed its third year without economic growth and is now hoping for an upswing supported by billions in state investments. For 2025, the Federal Statistical Office calculated a mini-growth of 0.2 percent on a preliminary basis. In 2023 (minus 0.9 percent) and 2024 (minus 0.5 percent), Europe’s largest economy slipped into recession.
In the new year, billions in spending on infrastructure such as roads and railways as well as investments in defense are likely to provide some impetus. The economy is also likely to benefit from the fact that there will be more working days in 2026 because more public holidays fall on a weekend.
However, many economists only expect a noticeable upswing from 2027, when the enormous sums that the state is investing will have their full effect. However, to ensure that the easing of the debt brake and the expenditure thus made possible do not create a flash in the pan, reforms are essential.
Year-end spurt 2025
At the end of 2025, the German economy was already gaining some momentum. Based on preliminary data, the Wiesbaden statisticians estimate that the gross domestic product (GDP) increased by 0.2 percent in the fourth quarter compared to the previous quarter, adjusted for price, season and calendar reasons.
“The growth is primarily due to increased consumer spending by private households and the state,” said the President of the Federal Statistical Office, Ruth Brand, when presenting the data in Berlin.
“In contrast, exports fell again. The export industry faced severe headwinds from higher US tariffs, the appreciation of the euro and stronger competition from China.” According to statisticians, exports fell for the third year in a row in 2025 (minus 0.3 percent). In addition, the lack of investment continues, explained Brand. Less investment was made in both equipment and buildings.
Government deficit is falling
Last year, the German state once again spent more money than it earned. According to preliminary data, the federal, state, local and social security deficits amounted to around 107 billion euros.
Nevertheless, Germany complied with the European debt rule: based on total economic output, the deficit was 2.4 percent. In 2024 it was 2.7 percent.
The European Stability and Growth Pact allows EU states to have a budget deficit of a maximum of three percent and a total debt of a maximum of 60 percent of nominal gross domestic product.