First annual growth after two years of contraction

German GDP increased by 0.2% in both the fourth quarter of 2025 and for the year as a whole, ending a prolonged period of economic weakness. In 2023 the economy had contracted by -0.3% and in 2024 by -0.2%, shaping the longest episode of deterioration in decades for the country. This turnaround marks, at least from a statistical point of view, the end of the recessionary cycle that began after the energy crisis and the industrial slowdown after 2022.

_
Why it is relevant for Germany and for the EU

Germany is the eurozone’s main economy and a central hub of its industrial and export fabric. The fact that it is growing again, albeit very moderately, has a symbolic and confidence-building effect for the region as a whole, after several quarters in which the country had acted as a brake on European growth. The data suggests that the economic downturn has stabilized, but does not yet point to a solid recovery of Europe’s industrial engine.

_
Nuances: extremely weak growth

The 0.2% annual growth is very limited and looks more like a scenario of stagnation than a real recovery. While other European economies are maintaining more dynamic rates of expansion, Germany is barely managing to grow. Signs of structural weakness persist:

• Private consumption fell 0.3% in the third quarter.
• Exports fell by 0.7% in the same period, affected by the trade environment and U.S. tariffs.
• The manufacturing and construction sectors continue to decline.
• Total investment fell by 0.5% in 2025, and investment in machinery and equipment declined by about 2.3%, reflecting business caution.

Growth has been supported mainly by domestic demand, with an increase of approximately 1.4% in household spending and 1.5% in public spending, especially in defense and infrastructure. It has not been a recovery driven by private investment or the foreign sector.

_
Risks on the horizon and structural weaknesses

The sustainability of growth is conditioned by several risk factors:

• Exposure to potential U.S. tariffs: Germany’s high trade surplus with the United States makes it a potential target for further trade measures.
• Persistent industrial weakness: large industrial groups such as Siemens, Bosch, Thyssenkrupp and Deutsche Bahn together cut more than 60,000 jobs in the first ten months of 2024, reflecting deep strains in the productive fabric.
• Structural problems: high bureaucracy, high labor costs and slow adaptation to decarbonization and digitalization processes continue to limit competitiveness in the medium term.

_
This is compounded by a more fragmented international context, with trade tensions continuing to weigh on industrial exports.

_
Outlook for 2026

The projections remain cautious and assume that German growth will continue to be below historical levels and conditioned by external risks and unresolved structural weaknesses.

Official forecasts point to growth of 1.3% in 2026, highly vulnerable to the slowdown in global trade.