The German economy is set to grow by 0.3% in 2025, marking a recovery after two years of contraction, according to a report from DIW Berlin dated June 13, 2025.

This growth estimate has been revised upward from an earlier prediction of 0.1%, thanks to a stronger-than-expected first quarter growth of 0.4%.

A combination of a significant investment package and improved financing conditions is anticipated to provide a substantial boost to the economy.

In March 2025, Germany's parliament approved a major spending plan that includes a 500-billion-euro ($577 billion) infrastructure fund and modifications to defense investment borrowing rules.

Additionally, an expected government investment package is projected to further stimulate economic activity by the end of the year.

Geraldine Dany-Knedlik, DIW’s chief economist, highlighted that the positive start to the year could help avert another year of stagnation.

Looking ahead, DIW forecasts a growth increase to 1.7% for 2026, significantly higher than the previous estimate of 1.1%.

This upward revision marks the fifth economic institute to adjust its growth forecasts positively for both 2025 and 2026.

However, challenges remain, particularly as U.S. trade policies are likely to impact German foreign trade and the broader global economic landscape.