IMF Executive Board Concludes 2025 Article IV Consultation with Germany
IMF News, February 12, 2026
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- Published: February 12, 2026
Recent shocks, economic performance, and near-term outlook
- Germany experienced major shocks in recent years, including the energy-price shock in mid-2022 and rapid monetary tightening to contain inflation, which contributed to two years of negative growth during 2023–24.
- The economy began to recover in late 2024 as these shocks started to dissipate, but the pace of recovery has been constrained by new trade-related headwinds.
- Weak growth in recent years also reflects lackluster underlying productivity growth, in part due to long-stalled structural reforms, and increasing competition in export markets.
- Inflation has been contained, supported by lower energy prices and subdued domestic demand.
- The authorities’ landmark reform of the debt-brake rule in 2025 is expected to help drive a gradual economic recovery.
- Planned fiscal easing in 2026–27 and the lagged effects of recent monetary loosening are expected to boost growth over the next few years.
- With growth being led by domestic demand, Germany’s current account balance is expected to decline gradually over time but remain positive.
- Inflation is expected to stay near the ECB’s target of 2 percent.
Medium-term outlook and structural headwinds
- Over the medium term, Germany faces a persistently challenging growth outlook despite higher public investment intended to boost medium- to longer-term productive capacity.
- Headwinds include rapid population aging, with the working-age population projected to decline more sharply than in any other G7 economy over the next five years.
- Productivity growth is likely to remain modest absent further reforms both domestically and at the EU level to improve economic efficiency and foster innovation.
Executive Board Assessment: findings and recommendations
- Directors welcomed the ongoing economic recovery and the improved outlook following the recent period of subdued growth amid successive external shocks and structurally weak productivity growth.
- Directors commended the authorities for the landmark reform of the debt brake to increase public investment and address critical needs.
- Directors supported using fiscal space in the near term to help stimulate the economy and close the negative output gap, which should support further external rebalancing.
- Recommended targeted measures to raise longer‑term potential growth, including:
- higher high‑quality public investment;
- reductions in high effective marginal income tax rates.
- Called for strengthening public investment efficacy and implementation to maximize the growth impact.
- Agreed on the importance of fiscal adjustment over the medium term to offset pressures from rising aging‑related and defense spending and to stabilize the public debt ratio, while safeguarding public investment.
- Recommended growth‑friendly fiscal options, including:
- sectoral spending reviews to identify savings;
- cuts in environmentally harmful subsidies;
- additional pension reforms to encourage longer working lives.
- Welcomed the authorities’ Modernization Agenda and called for prompt implementation of further structural reforms to support growth.
- To boost labor supply, recommended:
- improving childcare access;
- lowering high effective marginal income tax rates for second earners and lower‑income households;
- better integrating immigrants into the workforce.
- To boost productivity, encouraged reforms to support new, innovative firms (for example, revising tax rules that favor incumbent firms at the expense of new enterprises), cutting red tape, expanding digital infrastructure and skills, and boosting vocational training.
- Highlighted the need to deepen the EU Single Market to further boost growth in Germany and across Europe and encouraged preparation for risks from geo‑economic fragmentation.
- Concluded that the financial system is broadly resilient, with some pockets of vulnerability requiring close monitoring.
- Agreed macroprudential policy settings are broadly appropriate and recommended strengthening the toolkit through legislation to introduce more borrower‑based measures.
- Welcomed ongoing efforts to strengthen AML/CFT frameworks.
Key projections and selected economic indicators (2024–27)
- Output
- Real GDP growth (percent): 2024: -0.5; 2025: 0.2; 2026: 1.1; 2027: 1.5
- Total domestic demand growth (percent): 2024: 1.7; 2025: 1.6
- Output gap (percent of potential GDP): 2024: -1.1; 2025: -1.2; 2026: -0.7; 2027: 0.1
- Employment
- Unemployment rate (percent, ILO): 2024: 3.4; 2025: 3.7; 2026: 3.6; 2027: 3.3
- Employment growth (percent): 2024: 0.5; 2025: -0.1
- Prices
- Inflation (percent, headline, period avg.): 2024: 2.5; 2025: 2.3; 2026: 2.0
- Inflation (percent, core, period avg.): 2024: 3.2; 2025: 2.8; 2026: 2.2
- General Government Finances
- Fiscal balance (percent of GDP): 2024: -2.7; 2025: -2.4; 2026: -3.4; 2027: -4.1
- Revenue (percent of GDP): 2024: 46.8; 2025: 47.9; 2026: 47.8
- Expenditure (percent of GDP): 2024: 49.4; 2025: 50.3; 2026: 51.3; 2027: 51.9
- Cyclically adjusted balance (percent of GDP): 2024: -2.1; 2025: -1.8; 2026: -3.0
- Public debt (percent of GDP): 2024: 62.2; 2025: 62.6; 2026: 63.9; 2027: 65.7
- Money and Credit
- Credit to private sector (percent change): 2024: 1.0; 2025: 1.4; 2026: 3.8; 2027: 4.2
- Broad money (M3) (end of year, percent change) 2/: …
- 10-year government bond yield (percent): 2024: 2.4
- Balance of Payments
- Current account balance (percent of GDP): 2024: 5.8; 2025: 4.5; 2026: 4.0
- Trade balance (percent of GDP): 2024: 3.9; 2025: 2.7
- Exports of goods (percent of GDP): 2024: 31.4; 2025: 30.5; 2026: 29.7; 2027: 28.9
- Exports of goods, Volume (percent change): 2024: -2.2; 2025: 4.9; 2026: 1.3
- Imports of goods (percent of GDP): 2024: 25.9; 2025: 26.2; 2026: 25.7; 2027: 25.3
- Service trade balance (percent of GDP): 2024: -1.7; 2025: -1.6
- FDI balance (percent of GDP): 2024: 0.7; 2025: 0.9; 2026: 0.8
- Reserves minus gold (billions of US$): 96.8
- External Debt (percent of GDP): 147.6
- Exchange Rate
- REER (percent change): 0.3
- NEER (percent change):
- Real effective rate (2010=100) 3/: 97.5
- Nominal effective rate (2010=100) 4/: 107.4
Executive Board press release: IMF Executive Board Concludes 2025 Article IV Consultation with Germany (February 12, 2026).