After nearly a decade of stagnation, Germany saw signs of recovery in 2025, with the country’s gross domestic product increasing by 0.2%, according to the Wall Street Journal. While the strong numbers are a good sign for Europe’s largest economy, strong competition with China and massive stimulus funds from Berlin threaten continued growth.

Strong GDP growth follows years of economic turmoil, with the economy contracting 0.9% in 2023 and 0.5% in 2024. Germany’s industrial base fueled growth in the 2010s, according to the Wall Street Journal, but leading into the pandemic production slowed and government investment fell. Industrial weakness only worsened as energy prices rose amid Russia’s invasion of Ukraine.  

The eurozone country’s manufacturing output was down for a third year in a row in 2025. Additionally, exports of goods dropped 0.7% in 2025, largely due to lower vehicle and chemical exports, while imports rose by 3.6% following two years of decline. “Germany’s export business faced strong headwinds owing to higher U.S. tariffs, the appreciation of the euro and increased competition from China,” said Ruth Brand, president of the country’s Federal Statistical Office, per the Wall Street Journal.

The drop in exports lead to the trade surplus more than halved to 110 billion euros in 2025, according to Reuters, down from the 241-billion-euro trade surplus seen in 2024. The trade surplus is at one of the lowest levels seen in the last two decades, as Germany’s exports seems to stall.

Household consumption increased by a price-adjusted 1.4% in 2025, according to Reuters, while government spending grew by a price-adjusted 1.5%. Despite this growth, investment dropped by 0.5% in 2025 compared to 2024.

German Chancellor Friedrich Merz announced that boosting Germany’s economy would be his main focus for 2026, according to Reuters, with promises to revive the economy following the years of minor contraction paired with sharp increases in infrastructure and defense spending. While the news that the country’s economy is improving, albeit only slightly, Merz is hoping to improve conditions following the news that unemployment surpassed 3 million to hit a 12-year high.

“The rise in the number of unemployed to more than three million is an alarm signal,” Merz wrote on X, per Reuters. “The economic upturn must be this year’s central priority.”

Germany’s labor office announced that there are 177,000 more people out of work compared to December, with the unemployment rate jumping by 0.4% to reach 6.6% in seasonally adjusted terms. “There is currently little momentum in the ⁠labor market,” said labor office director Andrea Nahles, per Reuters. “At the start of the year, unemployment rose markedly for seasonal reasons.”

Credit managers with customers in Germany find that they are six days beyond terms on average, according to FCIB’s Credit and Collections Survey. Creditors are mostly offering 1-30 day terms (67%), with 17% of respondents not extending credit in the region. Payment delays are largely staying the same, with one in five respondents seeing an increase. Delays are caused by customer payment policies (60%), supply chain or shipping issues (40%), cash flow issues (40%) and billing disputes (40%).

“Know your customer—truly know your customer and business and history,” one respondent advised. “The Five Cs of Credit are more important than ever in the current world economics.”

“If you are in a service-related business, know that different services need to be invoiced separately,” another respondent wrote.