Germany’s economy registered a marginal increase in 2025, a tentative recovery following two years of recession, according to preliminary data released by the Federal Statistical Office (Destatis). The real Gross Domestic Product (GDP) rose by 0.2%, while the calendar-adjusted figure showed a 0.3% increase. This fragile growth, however, is largely attributed to increased consumer spending and government expenditure, masking underlying structural weaknesses.
Ruth Brand, President of Destatis, acknowledged the “slight growth” but highlighted the significant headwinds faced by key sectors. A persistent decline in exports, a crucial engine of the German economy, is a major cause for concern. Increased US tariffs, the Euro’s appreciation and intensifying competition from China are cited as contributing factors, alongside a continuing investment slump. Public and private investment both contracted, with particularly sharp declines in investment in equipment, indicating a lack of business confidence.
The gross value added, a measure of production, experienced a slight decrease, underscoring uneven performance across industries. Manufacturing has suffered three consecutive years of declines, with the automotive and mechanical engineering sectors particularly hard hit, facing fierce global competition. Energy-intensive industries like chemicals also witnessed decreased activity, failing to recover from previous lows. The construction sector continued its struggles, with value added dwindling and insolvency rates rising, exacerbated by soaring building costs.
While the services sector presented a mixed picture, with gains in retail, transport and hospitality, businesses and leisure services experienced contraction. Crucially, the significant rises in state and private consumption-1.5% and 1.4% respectively-appear to be propped up by rising healthcare spending, mobility costs (driven by increased car purchases) and increased public sector wages and social security contributions, potentially masking deeper issues of long-term affordability and structural competitiveness.
The trade balance reflected Germany’s vulnerability. Exports declined for the third consecutive year, primarily driven by reduced shipments of automobiles, machinery and chemical products. Service exports offered some respite, but insufficient to offset the decline in goods. Imports, conversely, surged, suggesting a weakening competitive position and increased reliance on foreign suppliers.
Employment figures remained stagnant in 2025, indicating a slowdown in labor market dynamism after years of growth. While public services showed job gains, the manufacturing and construction sectors experienced further declines, suggesting a shift in economic activity and potential skills gaps.
Germany’s public finances also paint a complex picture. The government deficit narrowed to approximately €107 billion, a decrease from the previous year, driven by slightly stronger revenue growth. However, the overall debt burden remains substantial, with a deficit-to-GDP ratio of 2.4% and a state ratio exceeding 50% for the first time since the COVID-19 pandemic, raising questions about long-term fiscal sustainability.
The preliminary estimate for the fourth quarter of 2025 offered a marginally positive outlook, with a 0.2% real GDP increase, but is considered preliminary and uncertain. While revisions to earlier quarterly data revealed a slightly improved economic performance, the overall picture highlights a fragile recovery, characterized by structural weaknesses, export headwinds and a need for substantial investment to secure Germany’s long-term economic competitiveness.