Germany raises 2025 growth forecast

Germany’s federal government on Wednesday revised its economic projections, raising its 2025 growth forecast to 0.2% from the flat growth previously estimated in April, Reuters reported.

The modest upgrade reflects tentative signs of stabilization in Europe’s largest economy after a prolonged period of stagnation, though officials cautioned that the recovery remains fragile. The government also lifted its outlook for 2026 GDP growth to 1.3% from 1.0%, and expects output to expand by 1.4% in 2027 as domestic demand gradually strengthens and global trade conditions improve.

Export performance, long a cornerstone of Germany’s industrial economy, is expected to remain subdued in the near term. Outbound shipments are projected to fall by 0.1% in 2025 amid weak external demand and geopolitical tensions but should rebound by 1.2% in 2026 and 1.6% in 2027 as global supply chains normalize and European trading partners regain momentum.

Meanwhile, domestic consumption is expected to slowly recover, supported by easing inflation, real wage growth, and fiscal measures to stimulate investment in energy transition and digital infrastructure.

Despite the cautious optimism, the labor market has shown renewed signs of strain. In August, the number of unemployed people in Germany exceeded 3 million for the first time in a decade, underscoring the lagging effects of weak manufacturing output and faltering export competitiveness. The unemployment rate is projected to edge down from 6.3% in 2024 to 6.2% in 2026 and further to 6.0% in 2027 as hiring conditions stabilize.

The government reaffirmed its commitment to maintaining fiscal discipline while investing in green and digital transformation projects—a delicate balance amid rising public spending needs and debt brake constraints.

Economists note that the pace of recovery will depend heavily on the implementation of structural reforms and the easing of global trade frictions, as Germany continues to grapple with the dual challenge of energy transition and industrial renewal.