German Finance Minister Klingbeil: I expect economic growth in the second half of the year with approved government measures.

German Finance Minister Klingbeil: I expect economic growth in the second half of the year with approved government measures.

German Finance Minister Robert Habeck has expressed optimism about economic growth in the second half of 2025, citing the approved government measures as a key factor. His remarks come amidst a backdrop of mixed global economic indicators and geopolitical tensions.

According to a recent report from the Organization of the Petroleum Exporting Countries (OPEC), the global economy may perform better than expected in the second half of the year despite ongoing trade conflicts. The report highlighted that countries like India, China, and Brazil are outperforming expectations, while the United States and the Eurozone are experiencing a continued rebound from last year [1].

In line with this positive outlook, the German government has implemented several measures aimed at boosting economic growth. These include increased public spending on infrastructure projects, higher public sector wages, and pensions. The German Economic Team forecasts that these measures will contribute to GDP growth of 3.3% in 2025, up from 2.8% in 2024 [2].

However, the expansionary fiscal policy also comes with risks. The International Monetary Fund (IMF) projects a budget deficit of 5% of GDP for 2025, which is considered too high for an economy growing at 3.3%. This high deficit, combined with rising public debt, may not be sustainable in the medium term. Structural reforms will be essential to support long-term economic growth [2].

Inflation remains a concern, with core inflation—excluding energy and food—standing at above 5% in April 2025. The de facto peg of the denar to the euro has been successful in maintaining price stability, but recent wage increases have added to inflationary pressures. Controlling inflation will be crucial for preserving competitiveness and the benefits of the euro peg [2].

Despite these challenges, Germany's strong integration with the EU and growing foreign direct investment (FDI) from the region signal a robust economic outlook. In 2024, foreign trade turnover in goods amounted to nearly EUR 19 billion, or 122% of GDP, with 77% of exports going to the EU. FDI inflows reached a historic high of EUR 1.25 billion in 2024, indicating growing investor confidence [2].

Venture Global Inc. (VG), a U.S.-based LNG exporter, has also contributed to Germany's energy security by signing an expanded LNG offtake agreement with Securing Energy for Europe (SEFE). The new contract, which amends a 20-year LNG sales and purchase agreement, will see SEFE Energy purchase an additional 0.75 million tons per annum of LNG from VG's CP2 LNG project in Louisiana [3]. This deal positions VG as the largest supplier of LNG to Germany, further bolstering the country's energy security.

In summary, while there are challenges to overcome, the approved government measures and strong integration with the EU suggest that Germany is well-positioned for economic growth in the second half of 2025.

References:
[1] https://shafaq.com/en/Economy/OPEC-Stronger-economy-to-boost-oil-demand-in-second-half
[2] https://www.german-economic-team.com/en/newsletter/sizeable-economic-growth-on-the-back-of-high-public-spending/
[3] https://www.nasdaq.com/articles/vg-strengthens-german-lng-market-presence-expanded-sefe-deal