In crisis still is her economy Germanyafter a stagnation in the first half of 2025, for the current year expected an increase in gross domestic product (GDP) by 0.2%.
For 2026 and 2027 there is a 1.3% increase in GDP and 1.6% respectively. Germany’s new federal government contributes to recovery, if it implements its plans arising from the new budgetary constitution for infrastructure and defense and announced in the negotiations for the formation of the coalition government.
The overall financial capabilities are still undergoing. Businesses in all sectors of the economy report ongoing low demand for their products and services, as well as worsening their international competitive position. Exports are burdened by US duties on imports, which are expected to remain unchanged during the prediction period.
Although industrial production and exports to the manufacturing sector were stimulated in the first quarter of 2025 thanks to promoted sales to US customers, production and exports resumed in the second quarter. Business investments have a slight upward trend since the beginning of the year.
The construction industry is still in recession: the increased demand in the public project sector, supported by the expansion of public investment in infrastructure, was only able to compensate in part in part in the private sector of residential construction. Private consumption only recovers slowly. Increasing the purchasing power that accompanies the increase in real disposable income decreases and the climate of consumer confidence has deteriorated in recent months.
Forecasts
In the third quarter of 2025, the financial performance is expected to increase only 0.1% slightly compared to the previous quarter. Subsequently, the new federal government’s fiscal policy will play a decisive role: measures included in the coalition agreement, such as accelerated depreciation, tax cuts in catering and tax on electricity for the manufacturing sector, reduced networking and taxing and increasing grid.
The fiscal moves will amount to € 9 billion in 2025, EUR 38 billion in 2026 and € 19 billion in 2027. If the measures are consistently implemented and thus reduced the great uncertainty, the budget policy could get the German economy from the crisis: the quarterly rates of GDP could reach up to 0.4%, and the rise of GDP could reach up to 0.4%. and could start a recovery phase. In 2027, as a result of fiscal incentives, the economy could even lead to excessive use.
Job market
The crisis also has an impact on the labor market. The number of employees is expected to increase by only 19,000 in 2025, because the participation rate, in particular the migration population, continues to grow significantly. At the same time, recorded unemployment is expected to increase by 155,000 and the unemployment rate will reach 6.3%. In 2026, the number of employees is expected to rise by 96,000, in 2027 by 225,000, while the unemployment rate will decrease to 6.1% and to 5.4% respectively. The labor market benefits from economic recovery, but is slowed by demographic changes.
Inflation
Inflation is expected configure 2.2% in 2025 and reduce to 2.1% in 2026. Energy prices are expected to continue to decline, as in early 2026 the network fees will be reduced and the burden on storing natural gas will be abolished.
Price is expected to gradually slow down in the service sector: in January 2026, the catering sales tax will be reduced, while the general wage increase will slow down next year. However, Significant increase in minimum wage in the next two years will compensate for the highest reduction in labor costs. In addition, as the economy is gaining ground, wage increases as a whole will be accelerated in 2027.
Basic inflation, that is, rising consumer prices without energy, will decrease from 2.6% this year to 2.4% in 2026, but will slightly increase to 2.5% in 2027. In addition, the price of CO₂ will increase significantly in 2027, which will lead to increased costs of energy and total exacerbation to 2.6%.