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Third year of recession? German economy has not recovered from global shocks
Germany, the EU’s largest economy, could end 2025 with a 0.2% drop in GDP, the third consecutive year of recession, according to a new study by the German Economic Institute (IW), cited by DPA.
“Global uncertainty, conflicts, rising tariffs and domestic costs are all hitting German exports and investment,” IW analysts say.
Construction stalls, unemployment rises
The construction sector shrank by 3.7% in 2024, and is expected to fall further. Rising costs and new regulations are further complicating the situation.
The labour market is facing the worst forecasts since 2010: by summer, the number of unemployed may exceed 3 million.
The way out is investment: Berlin is preparing a large-scale fund
Despite the worrying trends, the economy grew by 0.2% in the first quarter of 2025, driven by consumer spending. But this does not remove the threat of long-term stagnation.
The new government is planning a fund worth hundreds of billions of euros to support infrastructure and the defence industry as a way to boost the economy.
Dependence on the US as an opportunity and a vulnerability
In 2024, the United States remained Germany’s main trading partner, displacing China. However, trade barriers that began to take shape under Donald Trump’s presidency continue to hit German export-oriented businesses.
“Germany is much more sensitive to duties than most EU countries due to its large share of industry,” IW experts emphasise.
