GDP: What ails Germany, world’s third-largest economy, and how it could grow
In Explained’s weekly column, ‘GDP: Graphs, Data, Perspectives’, Udit Misra explains that without attempts to improve growth, India will easily overtake Germany in terms of overall GDP size. What brought it to this stage?
4 min readNew DelhiUpdated: Nov 14, 2025 05:32 PM IST
German Chancellor Friedrich Merz arrives for the cabinet meeting at the Chancellery in Berlin, Germany, Wednesday, Nov. 12. (AP Photo/Markus Schreiber)
Germany, the world’s third-largest economy after the US and China, with a total GDP (gross domestic product) of $5 trillion, is stagnating this year. In other words, it is registering barely any growth.
This stagnation — the German GDP is pegged to grow by just 0.2% this year — is coming at the back of two successive years of recession (that is, a year when, instead of growing, the GDP of an economy contracts). These are the findings from the annual report of the German Council of Economic Experts, which is an independent academic set up by law in 1963 and tasked with providing periodic assessments of macroeconomic developments in Germany.
As the TABLE alongside shows, far from leading the euro area, Germany is lagging behind in Europe, which incidentally lags far behind the global averages. The council of experts has laid out several reasons that have led to the German economy stalling.
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“In addition to cyclical factors, this weakness reflects structural changes and geopolitical shifts that are undermining the traditional German export model,” said the annual report by experts.
The biggest geopolitical upheaval this year has been the change of US leadership and that leadership’s approach towards providing economic and security guarantees to traditional allies such as Germany. This has forced European countries such as Germany to rethink their security framework and figure out resources to plug the gaps created be it in the spheres of defence or trade.
Within Europe, too, the continued fragmentation of the European Single market for goods, services and capital has prevented European countries from finding an effective response to new global challenges.
Lastly, there are contributory factors even within Germany. “Domestic aspects such as a sustained decline in the competitiveness of German industries and the ongoing demographic aging are also contributing factors,” states the report.
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When he first came to power six months ago, German Chancellor Friedrich Merz had pledged that he would boost growth. The government led by Merz had unveiled a new fiscal package to boost the economy by way of spending money towards bolstering the country’s infrastructure and investing in Germany’s defence capabilities. But bold announcements notwithstanding, the implementation has left a lot to be desired. Not surprisingly, Merz has slid sharply in popularity.
So, what can Germany do to reverse the trend? For one, the council of experts suggest that the increased fiscal spending by the government should be better targeted so as to boost investments.
Second, Germany should work towards closer integration of the European economies, including removing hurdles from achieving a genuine single market for goods and services; the European Union is after all the world’s second-largest economically integrated area.
Third, cut corporate taxes to incentivise businesses. And lastly, reducing wealth inequalities by making it easy for the worse off to accumulate wealth through initiatives such as the introduction of a state-subsidised long-term investment account, designed to strengthen financial security mainly in old age.
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However, if Germany doesn’t quickly address its subdued pace of economic growth, India, which has a GDP size around $4 trillion, will find it easier to overtake Germany in terms of overall size of economy, thus becoming the third-largest economy in the world.
Udit Misra is Senior Associate Editor at The Indian Express. Misra has reported on the Indian economy and policy landscape for the past two decades. He holds a Master’s degree in Economics from the Delhi School of Economics and is a Chevening South Asia Journalism Fellow from the University of Westminster.
Misra is known for explanatory journalism and is a trusted voice among readers not just for simplifying complex economic concepts but also making sense of economic news both in India and abroad.
Professional Focus
He writes three regular columns for the publication.
ExplainSpeaking: A weekly explanatory column that answers the most important questions surrounding the economic and policy developments.
GDP (Graphs, Data, Perspectives): Another weekly column that uses interesting charts and data to provide perspective on an issue dominating the news during the week.
Book, Line & Thinker: A fortnightly column that for reviewing books, both new and old.
Recent Notable Articles (Late 2025)
His recent work focuses heavily on the weakening Indian Rupee, the global impact of U.S. economic policy under Donald Trump, and long-term domestic growth projections:
Currency and Macroeconomics:
"GDP: Anatomy of rupee weakness against the dollar" (Dec 19, 2025) — Investigating why the Rupee remains weak despite India's status as a fast-growing economy.
"GDP: Amid the rupee's fall, how investors are shunning the Indian economy" (Dec 5, 2025).
"Nobel Prize in Economic Sciences 2025: How the winners explained economic growth" (Oct 13, 2025).
Global Geopolitics and Trade:
"Has the US already lost to China? Trump's policies and the shifting global order" (Dec 8, 2025).
"The Great Sanctions Hack: Why economic sanctions don't work the way we expect" (Nov 23, 2025) — Based on former RBI Governor Urjit Patel's new book.
"ExplainSpeaking: How Trump's tariffs have run into an affordability crisis" (Nov 20, 2025).
Domestic Policy and Data:
"GDP: New labour codes and opportunity for India's weakest states" (Nov 28, 2025).
"ExplainSpeaking | Piyush Goyal says India will be a $30 trillion economy in 25 years: Decoding the projections" (Oct 30, 2025) — A critical look at the feasibility of high-growth targets.
"GDP: Examining latest GST collections, and where different states stand" (Nov 7, 2025).
International Economic Comparisons:
"GDP: What ails Germany, world's third-largest economy, and how it could grow" (Nov 14, 2025).
"On the loss of Europe's competitive edge" (Oct 17, 2025).
Signature Style
Udit Misra is known his calm, data-driven, explanation-first economics journalism. He avoids ideological posturing, and writes with the aim of raising the standard of public discourse by providing readers with clarity and understanding of the ground realities.
You can follow him on X (formerly Twitter) at @ieuditmisra
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