IW Institute projects rising unemployment and falling GDP in Germany in 2025

Among developed countries, Germany is the only one forecast to face a decline in gross domestic product (GDP) in 2025. According to the IW Institute (Institut der deutschen Wirtschaft), GDP is expected to drop by 0.2%. Meanwhile, the US, the eurozone, and China are projected to grow by 1.3%, 0.8%, and 4%, respectively.

Both global tensions, including US tariffs, and domestic economic weakness are the main factors behind Germany's GDP decline. Currently, investment in the country remains low, while industrial and construction activity continues to contract.

The import duties imposed by the US in April have already impacted global indicators. According to IW estimates, without these measures, global GDP would have increased by 0.8%.

Tensions are also mounting in the German labor market. By summer, the number of unemployed people could reach 3 million, the highest since 2010.

According to IW, Germany is still in a recession. To recover, the country’s economic course needs to change. Institute representative Michael Groemling emphasizes the importance of revising the domestic business model.