German economy: external factors are holding back growth plans

The new German government, despite a massive economic stimulus plan, is unlikely to achieve significant growth this year. The fact is that external factors, especially US pressure, can significantly limit economic growth. 

The Bundestag plans to increase infrastructure spending by 150 billion euros from 2025 to 2029, equivalent to 0.7% of GDP per year. However, experts consider this to be an overestimate and predict an increase closer to 0.5% of GDP. Defense spending is expected to grow from 2.1% of GDP in 2024 to 3.5% by 2027.

The government also intends to reduce taxes for businesses and support sectors such as electric vehicles, restaurants and agriculture. But due to delays in implementation, the effect will be limited, and US duties will continue to put pressure, especially on pharmaceutical exports.

In the period from 2026 to 2028, GDP may grow by more than 1%, but only if mutual tariffs are suspended. However, limited steps to expand the workforce and focus on maintaining infrastructure will constrain economic potential. Even with increased defense spending, manufacturing production capacity will continue to decline, and long-term growth will remain at risk due to slow reforms and insufficient support for fast-growing industries.