Key Summary:
- The Ifo Institute raised Germany’s GDP growth forecast to 0.3% for 2025 and 1.5% for 2026, citing fresh fiscal measures.
- Recent German government plans include a €46 billion tax relief package and a €500 billion infrastructure fund, boosting expected growth.
- Ifo estimates an additional €10B growth impact in 2025 and €57B in 2026 from these policies.
- Altrom Centre: Policy-driven fiscal expansion in Germany signals a broader rebound in EU economic confidence amid structural challenges.
German Economy Shows Recovery
BERLIN, 12 June 2025 – Germany’s economy is showing signs of recovery, according to the latest forecast by the Ifo Institute. On Thursday, Ifo raised its growth outlook to 0.3% for 2025 (up from 0.2%) and to 1.5% for 2026 (up from 0.8%). The revision reflects the impact of a series of recently announced government measures aimed at jump-starting demand and investment. Notably, the new coalition government approved a €46 billion tax relief package last week, alongside plans for a €500 billion national infrastructure fund. These moves are intended to lift Germany out of its protracted stagnation.
German Economy Forecast
Ifo analysts estimate that the combined effect of these policies will raise growth by roughly €10 billion in 2025 and €57 billion in 2026. In practical terms, even modest momentum is now expected: Ifo predicts GDP will grow by 0.1 percentage points more in 2025 and 0.7 points more in 2026 than it would without these measures. The tax cuts and investment spending are expected to support domestic consumption and public infrastructure projects, which in turn could spark higher private investment.
This upbeat forecast comes amid wider European economic concerns, including weak post-pandemic recovery and global trade headwinds. Altrom Centre recognizes that Germany’s stimulus may have spill over effects for the wider EU economy. A stronger German demand could lift exports from neighboring economies, while large-scale infrastructure projects may foster supply chain opportunities across the region. However, the Centre also cautions that one-off boosts need to be complemented by structural reforms (such as labor market improvements and digital upgrades) to ensure sustained growth.
