By Maria Martinez
BERLIN, Jan 15 (Reuters) – The German economy grew by 0.2% in 2025, the Federal Statistics Office said on Thursday, the first expansion in three years as consumers and state spending begin to fuel a so far sluggish recovery.
Europe’s biggest economy became stuck in stagnation when its vast industrial sector got priced out of key export markets and consumers chose to save rather than spend
Chancellor Friedrich Merz has launched a huge spending plan to boost economic prospects but it is taking time to feed into the economy.
“After two years of recession, the German economy edged back into growth. The growth is primarily attributable to increased household consumption and government expenditure”, said Ruth Brand, President of the Federal Statistical Office.
The full-year 2025 increase in gross domestic product was in line with the forecast by analysts polled by Reuters.
The economy grew by 0.2% in the final quarter of 2025.
INVESTMENT STILL FALLING
Household consumption increased in 2025 by a price-adjusted 1.4%, while government spending grew a price-adjusted 1.5%, the statistics office said.
However, investment was down 0.5% compared with the previous year.
“The substantial growth in general government investment spending, particularly on defence, did not offset the decline in investment in machinery and equipment,” the office said, as there was a 2.3% drop year-on-year.
Germany’s parliament approved in March plans for a massive spending surge, throwing off decades of fiscal conservatism in hopes of reviving economic growth and scaling up military spending.
The fiscal plan includes a 500-billion euro ($568 billion) special fund for infrastructure and plans to largely remove defence investment from the rules that cap borrowing.
General government budgets recorded a financial deficit of roughly 107 billion euros ($124 billion) at the end of 2025, according to provisional calculations.
The financial deficit was almost 8 billion euros lower than in 2024 because government revenue grew 5.8%, more strongly than the 5.1% increase in government expenditure.
ANOTHER CHALLENGING YEAR FOR EXPORT-ORIENTED ECONOMY
In a turbulent year for German foreign trade, exports fell 0.3%, dropping for the third consecutive year.
“Germany’s export business faced strong headwinds owing to higher U.S. tariffs, the appreciation of the euro and increased competition from China,” Brand said.
Fewer motor vehicles, trailers and semi-trailers, machines and chemical products were exported. By contrast, exports of services were up a price-adjusted 1.1% on the previous year.
In terms of imports, the situation in 2025 was entirely different: Following two years of decline, imports rose substantially by 3.6% after adjustment for price effects.
($1 = 0.8598 euros)
(Reporting by Maria Martinez, Editing by Miranda Murray and Toby Chopra)
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