Economic Boost Expected from Germany’s New Federal Government Budget
The German economy could receive a significant boost from the new federal government’s budget, according to a report by the Süddeutsche Zeitung, citing the Berlin think tank Dezernat Zukunft. The think tank analyzed the 2025 budget and the financial planning up to 2029 and its economists now expect a 0.5% economic growth in 2025 and 1.9% in 2026, a higher projection than previously estimated by economic research institutes.
“The budget can noticeably stimulate the economy” said Florian Schuster-Johnson of Dezernat Zukunft in an interview with the Süddeutsche Zeitung, attributing this primarily to the credit-financed special reserve for infrastructure, known as the Investitionsbooster, which has a limited impact.
However, the special reserve is expected to have a limited effect on the medium-term economic growth, with economists referring to it as the potential growth. The potential growth must increase to ensure the sustainability of the growing interest burden of the federal government. Despite record investments, the potential growth is expected to rise by only 0.2 percentage points, according to Dezernat Zukunft. “That’s not nothing, but less than the government had aimed for” said Schuster-Johnson.