GERMANY's economy has been resilient but reforms are needed to unlock business dynamism and investment. Reducing administrative burdens for firms and regulatory barriers to competition while addressing skilled labour shortages will help revive economic growth and maintain high living standards across the country, according to a new OECD report.

The latest OECD Economic Survey of Germany projects GDP to grow by 0.4% in 2025 and 1.2% in 2026. Inflation is expected to average 2.4% in 2025 and 2.1% in 2026.

The recent reform of fiscal rules will enable increases in defence spending and address a large infrastructure investment backlog. To ensure medium-term fiscal sustainability, this reform should be combined with measures to raise spending efficiency, reallocate spending and broaden the tax base, while addressing rising spending pressures due to population ageing. Phasing out fiscal incentives for early retirement, while improving working conditions and incentives for older workers to work longer, would help stabilise the pension system.

“Continuing to accelerate structural reforms is key to revive Germany’s economic growth,” OECD Secretary-General Mathias Cormann said, launching the Survey in Berlin alongside Germany’s Federal Minister for Economic Affairs and Energy Katherina Reiche. “Combining the reform of fiscal rules with ambitious measures to reduce administrative burdens for firms and regulatory barriers to competition, and address skilled labour shortages, can spur greater business dynamism and boost productivity and growth.”

Administrative burdens for firms could be alleviated through greater efforts to review, simplify and harmonise existing regulations and administrative procedures across levels of government. Greater adoption of digital tools in the public administration could also ease the burdens of business registration and administrative processes. To strengthen competition, occupational entry regulations and licensing requirements to open a business should be reduced.

Skilled labour shortages should be addressed by improving work incentives for women, and older and lower-income workers, as well as further reducing barriers to skilled migration and continuing to improve education and training policies. Key priorities include reforming the joint income taxation of couples to lower marginal effective income tax rates for second earners and restricting Mini-jobs to students.

Designing policies to help regions embrace structural change is important for maintaining high living standards across the country. To unlock new opportunities for regions with slower growth and lower incomes, better coordination of placed-based, industrial and innovation policies is needed. Strengthening cooperation across municipalities would help raise spending efficiency and improve administrative capacities.