Germany raises economic growth projections

The German government on Wednesday increased its growth forecasts, saying it expected economic growth to narrowly avoid stagnation in 2025 before enjoying more pronounced growth in 2026.

The last government projection in April predicted zero growth for 2025 for Europe's largest economy, but this has been upgraded to 0.2%, with the estimate for 2026 raised from 1% to 1.3%.

"After two years of shrinking economic performance, a light, low-level recovery is expected for autumn 2025," read a government statement.

"By the turn of the year 2025/26, the internal economic dynamic should pick up speed, supported by financial and economic measures taken by the federal government."

Growth comes from state financing
For 2027, Germany is even predicting 1.4% growth.

"A substantial part of growth in the coming years will be a result of higher state financing, in particular from the special funds for infrastructural investments and increased investment in defense," Economy Minister Katherina Reiche told a press conference on Wednesday, presenting the projections.

However, the government projections have also come under criticism for essentially being financed by taking on public debt

Reiche also pointed to the need to lower energy prices and lower taxes in order to spur further growth.

"We need the courage to take decisive reforms," she said.

Germany's manufacturing sector has been struggling under the weight of high energy prices, fierce foreign competition and the effects of new US tariffs on EU products.

Earlier on Wednesday official data showed a sharp decline in industrial production in August, particularly in the automotive sector, which is facing stiff competition from China in particular.