Germany may be the sick man of Europe, but the industrial powerhouse is still top dog in terms of gains in real GDP growth for now. But not for long.

A three-year long recession is eating into the big lead, Germany built up before the war in Ukraine wrecked its cheap Russian energy for high quality widget manufacturing model that is a result of sanctions.

Germany’s sluggish performance in 2025 highlights the growing disconnect between scale and strength, according to new data compiled by BestBrokers and based on IMF projections. Germany's real GDP is expected to reach €3.54 trillion this year in nominal terms — enough to place it third globally behind the United States (€20.69 trillion) and China (€14.56 trillion). Yet beneath the surface, the numbers tell a more cautious story.

“The stagnation recorded in the most recent quarter reinforces a broader pattern of muted growth, with real GDP expanding only marginally over the past three years,” says Paul Hoffman, lead data analyst at BestBrokers. “Germany’s position as Europe’s largest economy remains secure, yet the latest figures point to an economy struggling to translate scale into momentum.”

In the third quarter 2025, Germany posted 0% quarter-on-quarter growth, as falling household consumption and weak exports offset a modest 0.8% rise in government spending. The projected 4.59% real GDP increase for 2025 — from €3.39 trillion in 2024 — may flatten a trajectory that has been marked by volatility: a contraction of 0.45% between 2023 and 2024 followed slower growth of 1.73% the year before. Over the full decade since 2016, Germany’s real GDP has grown just 7.41%.

The report also notes Germany’s per capita real GDP stands at €42,089, ranking it 20th globally and 13th in Europe — far behind regional microstates like Liechtenstein (€201,014) and Ireland (€108,554). While the nominal value of the economy is estimated at €4.35 trillion, the real per-capita output suggests much of Germany’s scale masks underwhelming productivity and investment.

Emerging Market growth engines

Among major economies, the United Kingdom comes in second in Europe and fifth globally with projected real GDP of €2.99 trillion, followed by France (€2.58 trillion) and Italy (€1.91 trillion) — the latter registering a robust 11.46% y/y increase. Russia, too, makes a notable appearance in the top 10, with a projected €1.5 trillion, up 11.18% from 2024.

Emerging markets are where the most dramatic shifts are taking place. Ghana is forecast to lead the world in real GDP growth in 2025 with a 17.35% increase, while Ethiopia is expected to suffer the steepest contraction at –34.63%. Over the longer term, Armenia’s 97.7% growth over the past decade contrasts sharply with Argentina’s 98.76% decline in real terms — a stark illustration of divergent global economic fortunes.

The final Eurozone manufacturing PMI was revised slightly down to 49.6, from an earlier flash estimate and October’s reading of 50. The modest downward revision was attributed primarily to weaker-than-expected results from Germany. A reading below 50 indicates contraction.

“Today’s final manufacturing PMIs for November brought only little revisions to the flash figures,” Oxford Economics stated. “The small downtick from October is consistent with the broad stagnation in industrial production we expect in Q4 at the Eurozone level.”

PPP terms

The nominal results paint a false picture as they are indicative of a country’s history, rather than its future. The centuries-old dominance of the developed world has left them with strong currencies that artificially inflate the value of their economies, but do not reflect current economic realities.

Europe’s economy has been badly hurt by the war in Ukraine and the boomerang effect sanctions on Russia have had. Cut off from the largest consumer market in Europe, at the same time average energy prices have doubled and the conveyer belt of raw materials has stopped.

The latest Purchasing Managers’ Index (PMI) data only underscores the pain Europe is feeling. The Eurozone’s manufacturing sector saw little change in November, with final PMI data pointing to continued stagnation across the bloc’s industrial base, Oxford Economics reported on November 28.

The final Eurozone manufacturing PMI was revised slightly down to 49.6, from an earlier flash estimate and October’s reading of 50. The modest downward revision was attributed primarily to weaker-than-expected results from Germany. A reading below 50 indicates contraction.

“The small downtick from October is consistent with the broad stagnation in industrial production we expect in Q4 at the Eurozone level,” Oxford Economics said in a note.

More generally, when GDP is compared in PPP (purchase power parity) terms the picture is very different: China becomes the world’s biggest economy, followed by the US and India respectively. Russia recently overtook Japan to become the fourth largest economy in the world, knocking Germany down another place to number six. Most of the countries rising in the PPP adjusted GDP rankings are from the new world, whereas most of the formerly leading countries are steadily sliding down the table.

Unrealised potential

For Germany, the picture remains one of unrealised potential. As Hoffman points out, “The disconnect between nominal gains and underlying real performance underscores persistent structural challenges, including weak external demand, soft private consumption, and long-standing investment shortfalls.”

Looking ahead, whether Germany can return to a more durable growth trajectory may depend less on macro stability and more on reforms that boost productivity, innovation, and domestic dynamism. However, according to the Draghi report released last year, Europe has to invest a collective €800bn a year to recover its competitive edge. That investment is not being deployed thanks to the need to spend hundreds of billions on military modernisation and the haemorrhaging for spare funds to support Ukraine in its war with Russia.

With other large economies pulling away — particularly the United States and China — Germany faces increasing pressure to do more than maintain its place on the podium. It must begin to run again.