German economy struggles despite slight GDP uptick
The German economy recorded a GDP growth of 0.4% in the first quarter of 2025; however, future forecasts remain pessimistic. Experts note that this is the longest period of stagnation since the Second World War. They refer to the recently published book "Kaput: The End of the German Economic Miracle" to explain the causes of this situation.
What you need to know
- In the first quarter of 2025, the German economy recorded a GDP growth of 0.4%, surpassing analysts' expectations.
- Meanwhile, the German Chamber of Industry and Commerce predicts that Germany's GDP will shrink by 0.3% in 2025, marking the longest period without economic growth since the Second World War.
- Economists from Bank Pekao, describing the current situation, refer to Wolfgang Münchau's book "Kaput: The End of the German Economic Miracle" and highlight the biggest mistakes of German governments.
Changes in the West: The situation in Germany
The Polish Economic Institute notes that despite the GDP growth in the first quarter of 2025, the German economy still struggles with a lack of strong signs of revival. Exports rose by about 3% quarter-over-quarter, mainly driven by demand for pharmaceuticals and automobiles. Nonetheless, the overall business climate remains pessimistic.
The German Chamber of Industry and Commerce forecasts that Germany's GDP will shrink by 0.3% in 2025. This would mark the longest period without economic growth since the Second World War. Despite temporary optimism, long-term prospects remain uncertain.
Can the German economy revive?
Economists from Bank Pekao refer to the recently published book by Wolfgang Münchau, "Kaput: The End of the German Economic Miracle".
Münchau outlines several reasons for the "death" of Germany's economic strength.
He asserts that Germany has become economically dependent on inexpensive gas from Russia and the market in China. Consequently, when gas prices increased and China developed industrial competencies, Germany ceased to progress. The author also highlights that Germany's industrial power still heavily relies on scientific and technical discoveries made by the country as far back as the 19th century.
Münchau also writes that Germany neglected investments in public infrastructure, as cutting spending in this area is easier than reducing social spending. For instance, the internet network in Germany is still slow and unreliable because it relies on copper and coaxial cables rather than fibre optics.
Investments anticipated to boost growth
Experts point out that hope for improving Germany's economic situation lies in a stimulus program through investments. This could potentially result in a positive GDP growth rate in the future.
However, despite positive indicators, the German economy remains stagnant. Germany is a crucial trade partner for Poland, making its economic condition significant for Polish exporting companies as well.
