The German government has raised its economic growth forecast for 2025

Domestic demand is expected to drive growth rather than foreign trade

Germany has raised its economic growth forecast for 2025 to 0.2% due to planned government spending, Reuters reports.

While additional spending on infrastructure and defense is expected to boost the economy in the long run, it will face challenges in the short term due to the US trade war.

The Economy Ministry expects growth of 1.3% in 2026 and 1.4% in 2027. Previously, the forecasts were 1% and 0%, respectively.

According to Economy Minister Kateryna Reiche, in order to ensure long-term growth, it is necessary to eliminate the backlog of reforms – to reduce energy costs, promote private investment, solve the problem of high taxes in international comparison, reduce bureaucracy, open markets and promote innovation.

Growth is expected to be driven not by foreign trade, but by domestic demand, including private and public consumption and investment activity.

In March of this year, the government headed by Chancellor Friedrich Merz approved a €500 billion spending plan to stimulate the German economy.

As a reminder, the German government has announced the launch of a large-scale €6 billion program to support the decarbonization of industry, including carbon capture and storage (CCS) technology in climate contracts for the first time. The initiative is aimed at energy-intensive sectors such as chemicals, steel mills, cement and glass plants amid stringent climate targets and concerns about the competitiveness of the country’s industrial sector.