Germany Economic Outlook
The heart of the European Union:
Germany is the EU's largest and most populous economy and the fourth-largest globally by nominal GDP. It plays a key role on the EU stage, with Berlin often having a deciding sway over policy changes in the bloc. Germany was a founding member of the Euro area and has adopted the euro as its currency since the currency union's creation in the early 2000s.
Manufacturing powerhouse:Germany is renowned for its industrial strength, particularly in the automotive, machinery, and chemical sectors. It also boasts a strong service sector, with a significant focus on financial services, IT, and tourism. The German economy is characterized by its high-quality engineering and skilled labor force.
Export hub:Germany is the world's third-largest exporter and the largest exporter in the EU, with exports roughly double those of France in 2022. The country is a leading exporter of machinery, vehicles, chemicals, and household equipment, making it highly dependent on global trade dynamics. Recent years have seen a shift towards more environmentally-friendly production processes and digital technologies in manufacturing.
Contrasting economic fortunes:Surging exports while globalization was at its peak in the mid-2010s drove healthy economic growth in 2014-17. However, rising trade tensions, supply restraints and weak global goods demand in the wake of the pandemic have hurt the economy in more recent years.
Challenges:The German economy faces several challenges, including an aging population, waning competitiveness amid shoddy physical and digital infrastructure, and transitioning to more sustainable and environmentally friendly production methods. In particular, the shift to electric vehicles poses risks to the car industry. Moreover, the export-led growth model has been called into question in an era of rising trade tensions.
Germany's economic outlook:Economic growth is expected to undershoot the Euro area average in the coming years due to a comparatively poor demographic outlook, a reliance on external demand and the country's reliance on legacy industries such as combustion engine vehicle production. More positively, inflation will be mild and public debt is set to remain the lowest in the G7 by some distance.
Germany's Macroeconomic Analysis:
Nominal GDP of USD 4,657 billion in 2024.
Nominal GDP of USD 4,657 billion in 2024.
GDP per capita of USD 54,900 compared to the global average of USD 10,589.
GDP per capita of USD 54,900 compared to the global average of USD 10,589.
Average real GDP growth of 1% over the last decade.
Average real GDP growth of 1% over the last decade.
Sector Analysis
In 2022, services accounted for 62.6% of overall GDP, manufacturing 19.0%, other industrial activity 17.7%, and agriculture 0.7%. Looking at GDP by expenditure, private consumption accounted for 50.7% of GDP in 2023, government consumption 21.6%, fixed investment 23.6%, and net exports 4.1%.International trade
In 2023, manufactured products made up 84.4% of total merchandise exports, mineral fuels 2.1%, food 6.0%, ores and metals 2.7% and agricultural raw materials 0.7%, with other categories accounting for 4.1% of the total. In the same period, manufactured products made up 72.7% of total merchandise imports, mineral fuels 8.6%, food 8.3%, ores and metals 4.1% and agricultural raw materials 1.0%, with other goods accounting for 5.3% of the total. Total exports were worth USD 1,674.90 billion in 2024, while total imports were USD 1,414.70 billion.Main Economic Indicators
Economic growthThe economy recorded average annual growth of 1.0% in the decade to 2024. However, in more recent years the economy has been weighed on by rising trade tensions, weak demographics, slow adaptation to emerging technologies, supply restraints and soft global goods demand in the wake of the pandemic. Germany's economy markedly underperformed the G7 average in 2021-23. To read more about GDP growth in Germany, go to our dedicated page.
Fiscal policy
Germany's fiscal deficit averaged 0.5% of GDP in the decade to 2023. This fiscal strength allowed Germany to implement substantial fiscal stimulus in response to the COVID-19 pandemic without significantly harming its overall fiscal position. By 2022, Germany's focus was on returning to pre-pandemic fiscal norms, balancing the need for improving competitiveness and boosting defense spending with its longstanding commitment to fiscal stability and debt reduction. Find out more on our dedicated page.
Unemployment
The unemployment rate averaged 5.8% in the decade to 2024. Even during the COVID-19 pandemic, Germany's unemployment rate increased only marginally, thanks to strong social safety nets and job support schemes. For more information on Germany's unemployment click here.
Inflation
Inflation averaged 2.5% in the decade to 2024. That said, the picture has changed notably since the pandemic: Inflation was well above the European Central Bank's 2% target in 2022 and 2023, due to global supply pressures, a strong bounce-back in economic activity, a rise in protectionism and the reduction of Russian gas flows. Go to our Germany inflation page for extra insight.
Monetary Policy
Euro Area monetary policy rate ended 2024 at 3.15%, up from 0.05% a decade earlier. The European Central Bank (ECB) maintained historically low policy rates from 2013 to 2021, reflecting prolonged economic sluggishness and low inflation in the Euro area. By 2022 however, the focus had shifted towards normalizing policy in response to economic recovery and rising inflation, with policy rates hiked to an over decade high. See our Germany monetary policy page for additional details.
Exchange Rate
From end-2014 to end-2024 the euro weakened by 20% vs the U.S. dollar.The euro saw volatility over the last decade in response to changes in global risk sentiment, and relative interest rates in the U.S. vs Europe. That said, the euro has tended to depreciate vs the dollar, likely on higher safe-haven demand and the United States' economic outperformance relative to the Eurozone. For more info on the euro, click here.
Economic situation in Germany
Germany disappointed markets in Q4 as GDP fell in sequential terms, marking again the worst performance among G7 countries. In Q1 2025, our panel expects growth to have tepidly returned on a rebound in exports. January data supports this forecast as goods exports rose from Q4’s average, and the key manufacturing sector recovered. That said, consumers remained deeply pessimistic in Q1, and real wages lost steam in January, hinting at muted private spending; retail sales deteriorated in the month. In other news, Parliament passed a landmark reform on 18 March, exempting defense spending from the constitutional debt brake—which caps the state’s annual net borrowing at 0.35% of GDP—and establishing a 12-year EUR 500 billion infrastructure fund; that said, it will take several months and effective government policies before the reform can reverse years of underinvestment.Germany Economic Forecasts
Projections out to 2034.57 indicators covered including both annual and quarterly frequencies.
Consensus Forecasts based on a panel of 59 expert analysts.
Want to get insight on the economic outlook for Germany in the coming years? FocusEconomics collects projections out to 2034 on 57 economic indicators for Germany from a panel of 59 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts, and averaged to provide one Consensus Forecast you can rely on for each indicator. This means you avoid the risk of relying on out of date, biased or outlier forecasts. Our Consensus Forecasts can be visualized in whichever way best suits your needs, including via interactive online dashboards , direct data delivery and executive-style reports which combine analysts' projections with timely written analysis from our in-house team of economists on the latest developments in the Germany economy. To download a sample report on the Germany's economy, click here. To get in touch with our team for more information, fill in the form at the bottom of this page.
Germany Economic Indicators
Frequently Asked Question about Germany's Economy
What type of economic system best describes Germany?
Why is Germany's economy so powerful?
Is Germany doing well economically?
Germany's economic system is best described as a social market economy. This system combines a free-market capitalist approach with social policies that establish a degree of government regulation in the economy and a welfare state. In summary, it emphasizes both economic efficiency and social equity.
Germany's economy is powerful due to its highly skilled labor force, strong industrial base, leading position in engineering and manufacturing (especially automotive and machinery), robust export sector, and effective social market economic model.
Germany's economy is currently struggling. Drags on economic growth stem from the fallouts of the war in Ukraine, high energy prices and tight monetary policy.