Reference News Network, January 17 report, according to Reuters, January 15. Germany's economy achieved its first expansion in three years in 2025, as a surge in consumer and government spending began to drive the previously sluggish recovery.
The reason for the stagnation of this largest European economy was that its large industrial sector was pushed out of major export markets due to high prices, and consumers chose to save rather than spend.
German Chancellor Friedrich Merz introduced a massive spending plan to boost economic prospects, but its impact on the economy will take time to materialize.
Ruth Brand, head of the Federal Statistical Office, said: "After two years of recession, Germany's economy has gradually recovered growth. The main reason for the growth is increased household consumption and government spending."
The economy grew by 0.2% in the last quarter of 2025 and for the whole year. This annual growth rate is consistent with analysts' forecasts surveyed by our agency.
Klaus Wiessing, chief eurozone economist at Palindrome Macro Economics Research, said that Germany's economy was largely stagnant in the previous year, but it improved compared to 2024.
Wiessing said: "Looking ahead, our forecast assumes that the German economy will gain momentum from now on, mainly due to a shift in the investment cycle supported by ongoing fiscal stimulus measures (focusing on infrastructure and defense spending)."
Gross domestic product (GDP) is 0.2% higher than the level before the COVID-19 pandemic in 2019, finally regaining lost ground, although there is still a gap compared to other European countries.
In 2025, German household consumption increased by 1.4% after price adjustments, and government spending increased by 1.5% after price adjustments.
However, investment fell by 0.5% compared to the previous year.
The statistics office said: "Government broad investment expenditure (especially in defense) did not offset the decline in machinery investment." That part declined by 2.3%.
The German parliament approved a large-scale plan to increase spending in March of last year, abandoning decades of fiscal conservatism, hoping to revitalize economic growth and expand military spending.
The fiscal plan includes a 500 billion euro infrastructure special fund and intends to exclude defense investment almost entirely from borrowing restriction rules.
Although government spending increased by 5.1% in 2025, the fiscal deficit decreased by nearly 800 million euros compared to the previous year, due to an income increase of 5.8%.
Germany's foreign trade experienced a turbulent year, with exports decreasing by 0.3%, marking the third consecutive year of decline.
Brand said: "Due to U.S. tariff increases, the appreciation of the euro, and intensified competition from China, Germany's exports face strong resistance."
Exports of motor vehicles, trailers and semi-trailers, machinery, and chemical products declined. In contrast, service exports increased by 1.1% after price adjustments compared to the previous year.
After two consecutive years of decline, imports increased significantly by 3.6% after price adjustments.
Therefore, the trade surplus in 2025 was 110 billion euros, more than half of the 241 billion euros in 2024. This is one of the lowest levels in over two decades, indicating that Germany's export growth engine has lost momentum.
Karsten Böse, head of global macroeconomics at ING, said: "The nationwide slump has ended, and we finally have sufficient reasons to be more optimistic about the German economy." He believes that fiscal stimulus is the main reason for the optimism.
ING predicts GDP growth of 1% this year, but Böse pointed out that Germany's economic problems are deeply rooted and often structural, mainly self-inflicted, and cannot be resolved quickly.
Böse said: "As for Germany's growth prospects, the corn is about to pop. However, a healthy diet is not just popcorn." (Translated by Ge Xuelai)
Original: toutiao.com/article/7596291496446394943/
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