In a statement detailing policy recommendations, the IMF said Germany could invest up to 0.5 percent of gross domestic product a year more over four years without violating fiscal rules and with only a small effect on the debt-to-GDP ratio.
"Such a programme would yield a persistent increase in GDP by crowding in private investment and would also stimulate growth in the rest of the euro area," the IMF said in the statement.
The Fund also expected Germany's recovery to gather further momentum and said it would likely raise its growth forecast for Germany soon.
The Fund said in April it expected German growth this year of 1.7 percent and of 1.6 percent next year.
Germany's government forecasts growth this year of 1.8 percent, followed by 2.0 percent in 2015.