German economy grew despite crises - High debt increases the risk of the country's credit rating being lowered
The German economy is showing signs of life with new, albeit small, growth despite all the crises. From April to June, Gross Domestic Product (GDP) grew by 0.3% compared to the previous quarter, 0.1 percentage point more than initially estimated, the Federal Statistical Office announced.
In total, 2% more goods and services were exported than in the first quarter of 2026. On the other hand, private and government consumption increased only slightly, by 0.1% each.
However, summer droughts bring new problems for companies and consumers, while the financial challenges for the state remain great. In the first six months of this year, the state spent 71.3 billion euros more than it earned.
The state deficit was 36.6 billion euros higher than in the same period last year. In relation to economic output, the deficit of the state, the states, municipalities and the social security system in the first half of 2026 amounted to 3.1%.
The largest part of the deficit is related to state and federal institutions, where the deficit increased by 29 billion euros and now amounts to just over 48 billion euros. The deficit also increased at the level of the German states, while the municipalities managed to reduce their deficit compared to the same period last year. The social security system recorded a deficit of 1.8 billion euros, after having a surplus of 3.8 billion euros in the first half of 2025. This is mainly due to higher spending on state health insurance and healthcare insurance.
The financial situation in the budget is still tense. Given that the state is investing billions of euros through borrowing in roads, railways and defense, experts expect the budget deficit share to increase from 2.7% in the whole of 2025 to over 4% in 2027. Germany's growing debt, according to some economists, increases the risk that the country's credit rating will be lowered.
If credit rating agencies strip Germany of its top AAA rating, it would be more costly for the state to borrow new money on the financial market than for investors.
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