German economy to grow 0.3% in 2025, DIW Berlin raises forecast

DIW Berlin revised its 2025 German GDP growth forecast upward to 0.3% from a previous 0.1% projection, joining other institutes in a more optimistic outlook. This revision follows a stronger-than-expected 0.4% expansion in Q1 2025, signaling a potential recovery after two years of contraction, with further growth anticipated later in the year due to government investment.

Analysis

DIW Berlin has upwardly revised its 2025 German GDP growth forecast to 0.3% from a previous projection of 0.1%, marking the fifth economic institute to express increased optimism for Germany's economic trajectory in 2025 and 2026. This adjustment follows a notable 0.4% expansion of the German economy in the first quarter of 2025, a significant development as it signals a potential recovery after two consecutive years of economic contraction. The report from DIW Berlin further anticipates that the German economy will gather additional momentum towards the end of the year, a trend expected to be bolstered by a government investment package. This confluence of revised forecasts and positive Q1 data suggests a strengthening outlook for Europe's largest economy.

Key Decisions for Investors

• Investors should consider the increasingly positive consensus on German economic growth, particularly the Q1 2025 expansion of 0.4% and revised 0.3% GDP forecast for the year, as a potential catalyst for re-evaluating exposure to German equities and Eurozone-focused assets.
• The anticipated government investment package warrants monitoring for specific sectoral opportunities that may arise within the German economy, potentially offering targeted investment theses.
• It is advisable to continue tracking subsequent German macroeconomic data releases to confirm the sustainability of this nascent recovery and the materialization of the projected growth acceleration.