Germany's struggling economy records slight expansion following two years of contraction

Germany's Economy Shows Signs of Recovery

FRANKFURT, Germany (AP) — After two consecutive years of economic decline, Germany’s economy managed to achieve slight growth last year, according to official data. Optimism is building that increased government investment in infrastructure, such as bridges, railways, and defense, could help the country move past a prolonged period of stagnation.

The German Federal Statistical Office reported a 0.2% rise in gross domestic product for 2025, driven primarily by higher consumer and public sector spending. However, exports struggled, weighed down by stricter U.S. trade policies under President Donald Trump.

This modest growth follows contractions of 0.5% in 2024 and 0.9% in 2023.

Ruth Brand, head of the statistical office, noted that “Germany’s export sector encountered significant challenges due to increased U.S. tariffs, a stronger euro, and mounting competition from China.”

There is growing anticipation that Germany will experience more robust growth this year. Chancellor Friedrich Merz’s administration is moving forward with plans to boost infrastructure spending to address years of underfunding. At the same time, defense expenditures are climbing in response to heightened security concerns following Russia’s invasion of Ukraine.

Germany has faced a lengthy period of stagnation since the COVID-19 pandemic. The economy, which relies heavily on exports, has been hampered by rising energy prices after the conflict in Ukraine and increased competition from China in key sectors like automotive and industrial machinery. The introduction of higher tariffs on EU goods by the Trump administration further strained exports. Slow growth has also highlighted persistent structural problems, including excessive bureaucracy and shortages of skilled workers. Additionally, a stronger euro has made German products less price-competitive abroad.

Leading economists forecast a 0.9% increase in GDP for this year, though they caution that this outlook could be threatened if government spending is rolled out more slowly than planned.

Preliminary figures indicate that Germany’s economy expanded by 0.2% in the final quarter of 2025.