Economists Predict Germany Will Return to Growth This Year

A Bloomberg survey of economists indicates Germany's GDP is projected to grow by 0.2% in 2025, revising upward their May forecast of stagnation, signaling a potential recovery after two years of contraction. Growth is expected to accelerate to 1.1% in 2026 and 1.7% in 2027, driven by increased government spending on infrastructure and defense.

Analysis

Germany's economy is forecast to return to growth in 2025, with economists surveyed by Bloomberg projecting a 0.2% expansion in Gross Domestic Product. This represents an upward revision from their May poll, which anticipated stagnation, and signals a more optimistic near-term outlook for Europe's largest economy following two years of contraction. The growth trajectory is expected to accelerate further, with projections of 1.1% in 2026 and 1.7% in 2027. This anticipated acceleration is attributed to sharply higher government outlays on infrastructure and defense, which are expected to be key drivers of economic activity in the medium term, underpinning a strongly positive sentiment regarding Germany's economic prospects.

Key Decisions for Investors

• Investors should consider the implications of Germany's revised 2025 GDP growth forecast of 0.2% and its projected acceleration to 1.1% in 2026 and 1.7% in 2027 for German-exposed assets.
• Sectors such as infrastructure and defense warrant particular attention, given the identified catalyst of increased government spending that is expected to drive medium-term growth.
• Monitoring subsequent German economic data releases and the effective implementation of announced fiscal policies will be crucial to validate these growth projections and adjust investment strategies accordingly.