Berlin: Germany’s leading economic think tanks have slightly raised their growth forecast for 2025, offering a glimmer of optimism for Europe’s largest economy. The new joint projection estimates gross domestic product (GDP) growth at 0.2 percent, up from the 0.1 percent forecast released in April.
The revision comes after months of sluggish performance, as Germany continues to grapple with the lingering effects of global trade disruptions, weak industrial output, and structural challenges in its economy. While modest, the increase suggests that public investment and government policies could help stabilize growth.
The institutes maintained their earlier forecast of 1.3 percent growth in 2026, while also releasing a new projection for 2027, pegging it at 1.4 percent. These figures reflect expectations that the government’s push for higher spending on infrastructure and defense will gradually yield positive results in the medium term.
Chancellor Friedrich Merz, who took office in May, has placed economic revival at the core of his administration. His plans for boosting public investment are viewed as central to lifting the economy out of stagnation. Economists note, however, that the reforms are advancing more slowly than anticipated, and the benefits may take time to materialize.
Despite the upward adjustment, the outlook remains cautious. Analysts warn that external risks, particularly global trade tensions and uncertainty in international markets, could undermine growth. Germany’s heavy reliance on exports leaves it vulnerable to global economic shocks, meaning the recovery is far from guaranteed.
Geraldine Dany-Knedlik of DIW Berlin, one of the contributing institutes, summarized the situation by noting that “the German economy is still on shaky ground.” While the country is expected to recover noticeably over the next two years, the underlying structural weaknesses pose a challenge to sustaining long-term momentum.
The revised forecast underscores a delicate balance: short-term optimism tempered by long-term caution. Germany’s economy may be edging away from stagnation, but it still faces a demanding road to robust and sustained growth.