Overview
- The IMF says Germany’s relaxation of fiscal rules and higher public spending have set the stage for recovery, with GDP growth projected at 0.2% in 2025, about 1.0% in 2026, and 1.5% in 2027.
- Planned surges in infrastructure and defence outlays are expected to lift investment and consumption, helping pull the economy out of two years of stagnation.
- The IMF projects the budget deficit to widen to roughly 4% of GDP by 2027 and public debt to rise to about 68% of GDP, still the lowest in the G7.
- Officials call for targeted structural steps including more innovation and digitalisation, cutting red tape, easing labour supply constraints, and deeper European single-market integration.
- Critics question the pace and direction of the government’s plans, while Chancellor Friedrich Merz defends a deliberate approach and points to planned changes to corporate tax and industrial power prices.