German economy expands by 0.4% in first quarter, avoids recession

Germany’s economy grew by 0.4% in the first quarter of 2025, according to revised figures from the Federal Statistical Office, outperforming the preliminary estimate of 0.2%. The stronger-than-expected performance allowed the country to avoid a technical recession, defined as two consecutive quarters of economic contraction. In the final quarter of 2024, Germany’s GDP had declined by 0.2%.

The improved growth figures are attributed primarily to a robust upswing in March. Ruth Brand, President of the Statistical Office, highlighted that industrial production and exports, particularly in the automotive and pharmaceutical sectors, performed better than initially projected. Analysts link this export growth partly to anticipatory purchases by international customers concerned about upcoming trade barriers, particularly in the United States.

Carsten Brzeski, an economist at ING, commented that the data marks a rare positive surprise for the German economy. However, he cautioned that the improvement is likely temporary, driven by efforts to mitigate the impact of potential new U.S. tariffs under the administration of President Donald Trump.

Despite this, some economists remain cautiously optimistic. Cyrus de la Rubia of Hamburg Commercial Bank noted that there are reasons to believe the economy’s upward trend could continue. Brzeski also pointed to the newly announced infrastructure investment package by Chancellor Friedrich Merz’s government, which allocates €500 billion for development projects. This could serve as a long-term stimulus for economic growth.

Nevertheless, Germany’s economic outlook remains uncertain. The government’s advisory body, known as the Council of Economic Experts, downgraded its forecast this week and now predicts no growth for 2025. This represents a sharp revision from the 0.4% growth forecast issued in November and the 1.1% estimate made in October last year. The German government itself also lowered its projection to stagnation, revising its January estimate of 0.3%.

Germany, the largest economy in the European Union and the Czech Republic’s main trading partner, saw its GDP shrink by 0.2% in 2024 and by 0.3% in 2023. As many Czech businesses depend on Germany’s economic performance, developments in the German market continue to have significant regional implications.