German economy: Brief growth amid looming long-term decline
The German economy recorded a GDP growth of 0.4% in the first quarter of 2025, yet future forecasts remain pessimistic. Experts highlight that this marks the longest period of stagnation since World War II. In explaining the causes, they refer to the recently published book "Kaput: The End of the German Economic Miracle."
What you need to know
- In the first quarter of 2025, the German economy recorded a GDP growth of 0.4%, surpassing analysts' expectations.
- Simultaneously, the German Chamber of Industry and Commerce predicts a 0.3% GDP contraction in 2025, marking the longest period without economic growth since World War II.
- Economists from Bank Pekao, discussing the current situation, reference Wolfgang Münchau's book "Kaput: The End of the German Economic Miracle" to highlight the major mistakes of past German governments.
Changes happening in the West: the situation in Germany
The Polish Economic Institute highlights that, despite GDP growth in the first quarter of 2025, the German economy continues to struggle with the absence of strong revival signs. Exports increased by approximately 3% quarter-over-quarter, primarily driven by demand for pharmaceuticals and cars. However, the overall business climate remains pessimistic.
The German Chamber of Industry and Commerce forecasts a 0.3% GDP contraction in 2025. This would represent the longest period without economic growth since World War II. Despite temporary optimism, long-term prospects remain uncertain.
Is there a chance for the German economy's revival?
Economists from Bank Pekao reference Wolfgang Münchau's recently published book "Kaput: The End of the German Economic Miracle."
Münchau identifies several reasons for the "death" of Germany's economic strength.
He explains that Germany has become economically reliant on cheap gas from Russia and a market in China. Therefore, when gas prices rose and China gained industrial competencies, Germany's development stalled. The author also notes that Germany's industrial prowess still depends on scientific and technical discoveries from as far back as the 19th century.
Münchau also argues that Germany underinvested in public infrastructure, as cutting spending here is easier than reducing social spending. For example, the internet network in Germany remains slow and unreliable due to its reliance on copper and coaxial cables instead of fiber optics.
Investments anticipated to stimulate growth
Experts suggest that hope for revitalizing Germany's economic condition lies in a stimulus program focused on investments. This approach could potentially lead to positive GDP growth rates in the future.
