The International Monetary Fund (IMF) estimates that Germany's economy has started to recover due to increased government spending and a revision of fiscal rules. However, medium-term prospects remain cautious due to demographic challenges and low productivity. Germany, the only G7 country without growth for two years, is projected to grow by just 0.2% in 2025.
The government plans to boost investments in infrastructure and defense to stimulate consumption. The IMF expects GDP growth to accelerate to 1.0% in 2026 and 1.5% in 2027. However, the budget deficit may widen to 4% of GDP by 2027, and public debt could reach 68% of GDP, which still represents the lowest level among G7 countries.
The main structural issues continue to be an aging population and weak labor productivity growth. IMF economists recommend that Berlin make more effective use of fiscal opportunities by stimulating innovation, accelerating digitalization, lowering administrative barriers, and deepening integration within the European Union.
