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With a gross domestic product of 4,305 billion euros in 2024, Germany is the third largest economy in the world after the United States and China and just ahead of Japan, making it the largest economy in Europe. In particular, exports of motor vehicles and vehicle parts as well as chemical products have made Germany the third largest export nation in the world to date. At 70%, the service sector accounts for the largest share of the country's gross domestic product (GDP).

In addition, Germany is a top destination for investors, attracting an ever increasing number of companies to make greenfield investment there. As the largest economy in Europe, Germany entices its investors with its central-european location, but simultaneously puts them off with the current deterioration of Germany's situation as an economic destination. 

The struggling German economy grew by +0.4% in the first quarter, twice as much as economists had originally forecasted. Rising exports and higher consumer spending provided a boost to the Gross Domestic Product (GDP) compared to the previous quarter.

In particular, exports—such as cars and pharmaceuticals—supported the economy in the first quarter. Anticipatory effects in the ongoing trade conflict with the USA are likely to have contributed to the positive development. Exports increased by +3.2% compared to the previous quarter.

In addition, private consumer spending also rose by +0.5% compared to the previous quarter. With declining inflation and significantly increased wages in some sectors, many people have more money in their pockets. Investments in buildings (+0.5%) and equipment (+0.7%) also grew.

The sentiment among companies in Germany has also slightly improved. The ifo Business Climate Index rose to 87.5 points in May 2025, from 86.9 points in April. This was due to less skeptical expectations, while the current business situation was assessed somewhat worse. Overall, the recently sharply increased uncertainty among companies has slightly decreased.

The government spending ratio, which indicates the government's influence on an economy, is calculated as the total government expenditure as a percentage of GDP. According to the International Monetary Fund (IMF), this was 49.5% in Germany in 2024, above the average of the G7 countries of 46.1% and the government spending ratio of other major economies, such as the United Kingdom (44.0%), the USA (37.6%), and China (32.9%).

The share of taxes and social security contributions in total labor costs for average earners was 47.9% for singles without children in Germany in 2024, according to the OECD. This places Germany in the second-worst position among the 38 OECD member states, after Belgium, and significantly above the OECD average of 34.9%, which affects Germany's attractiveness as an investment location. In countries outside the EU, such as the United Kingdom (29.4%) or the USA (30.1%), the rate is significantly lower.

An assessment of Germany as a business location by international investors is shown in our study Business Destination Germany 2024. As part of the study, 350 CFOs of the largest German subsidiaries of international corporations from the most important investor countries were surveyed on how they assess Germany as a location. Since the study has already been published for the fourth time in a biennial rhythm, it also allows for trend statements.

Insights into global growth prospects, opportunities, and challenges are also provided by the ÀÖÓ㣨Leyu£©ÌåÓý¹ÙÍø Global Navigator.

Assessments of the economic situation, generative AI, ESG, and other current topics are also shown in our CEO Outlook 2024/25, for which 1,325 CEOs of large companies worldwide were surveyed, including 125 CEOs in Germany.

The latest forecasts of German economic research institutes and government organizations for the development of GDP in Germany recently ranged between -0.2% and +0.4% for the calendar year 2025:

An increasing number of institutes now expect the German economy to stagnate or even fall back into recession this year. In particular, the additional tariffs imposed by the U.S. administrationâ€�10% on all EU products, 25% on cars and car parts, and 50% on steel and aluminum—are hitting Germany’s export-oriented economy hard.

However, the Kiel Institute for the World Economy (IfW), as of April 30, 2025, assumes that the costs for the EU and its member states will remain manageable. The reason: the U.S. tariff regime applies globally, meaning the EU and Germany are not facing specific disadvantages. In Germany, the effects are most visible due to the economy’s strong reliance on international trade. As a result, economic output is expected to decline by an additional -0.2% over the year.

German exports declined in April 2025 for the first time since October 2024. Exports fell by -1.7% compared to the previous month and by -2.1% year-on-year, amounting to â‚�131.1 billion.

The United States remained the largest destination for German exports, totaling �13.0 billion in April. However, exports to the U.S. dropped by 10.5% compared to March, which had been marked by anticipatory effects as U.S. importers sought to avoid impending tariff increases.

In contrast, imports rose sharply in April, increasing by +3.9% month-on-month to �116.5 billion. Most imports came from the People’s Republic of China, with seasonally and calendar-adjusted imports valued at �13.9 billion—down -4.1% from the previous month.

According to calculations by the Kiel Institute for the World Economy (IfW Kiel), German exports are expected to decline by -0.2% over the year, mirroring the projected contraction in overall economic output.

The real (price-adjusted) volume of new manufacturing orders rose by +0.6% in April 2025 compared to March 2025, after seasonal and calendar adjustments. In the less volatile three-month comparison, order intake from February to April 2025 was +0.5% higher than in the preceding three-month period.

There was no change in consumer prices in Germany in May: They rose at the same pace as in April. The inflation rate remained steady at 2.1%.

Food prices continued to be a key driver of inflation, increasing by +2.8%. Service prices rose by +3.4%, while goods became +0.9% more expensive. Core inflation—which excludes food and energy—fell to 2.8%. Energy, on the other hand, became significantly cheaper once again, costing -4.6% less than a year earlier. One reason for this is falling global crude oil prices, which are attributed to the trade war initiated by the U.S. President. According to economists, this conflict is weighing on the global economy and dampening demand for oil.

The number of companies planning to raise prices in the coming months declined slightly in March 2025: The ifo Institute’s price expectations barometer fell slightly to 18.7 points in March 2025 (February 2025: 19.3 points).* While retailers and manufacturers are less likely to plan price increases, service providers see more room for raising prices.

*The index value indicates the net percentage of companies intending to raise prices (i.e., the share of companies planning price increases minus those planning reductions). A value of +100 would mean all surveyed companies intend to raise prices; -100 would mean all intend to lower them.

Current forecasts from German economic research institutes and government organizations suggest that the inflation rate in Germany will remain roughly at its current level. For the calendar year 2025, projections range between +2.0% and +2.4%:

The Kiel Institute for the World Economy (IfW Kiel) expects prices to decline by -0.3% over the course of the year, as products originally intended for the global market are now being offered domestically.

Fears of a “flood� of Chinese goods—previously exported to the United States and now potentially creating additional competition for German and European exporters on the global market—are, according to simulation calculations, unfounded.

The spring revival of the German labor market has been exceptionally weak this year.
After only slight improvements in March and April, the number of unemployed people in May decreased by just 12,000 compared to April, bringing the total to 2.919 million. That’s 197,000 more than a year ago. The unemployment rate fell by 0.1 percentage points to 6.2%.

The economic weakness is leaving increasingly deep marks on the labor market.
Although the risk of becoming unemployed due to job loss remains relatively low, it is steadily increasing. At the same time, the chances of ending unemployment by taking up a job are at a historically low level. Employers remain cautious about reporting new job openings.

Social security-contributing employment has grown slightly on a seasonally adjusted basis.
However, this growth is modest. Employment subject to social security contributions is increasing in public service-related sectors, while there are significant declines, particularly in the manufacturing industry.

More and more companies in Germany are shutting down.
This is the result of a joint study by Creditreform and the Centre for European Economic Research (ZEW) in Mannheim. According to the study, the number of business closures in 2024 rose by 16% compared to the previous year. In total, 196,100 companies across the country ceased operations � the highest figure since 2011, when many businesses had to close due to the financial crisis.

The closure figures are alarming across all economic sectors.
Industrial companies in particular are suffering from high energy costs in production, while competitive pressure from foreign providers is increasing. Especially striking is the sharp rise in closures of larger, economically active companies � a trend that has now continued for the third year in a row. In 2024, more than 4,050 such companies were deregistered � almost twice as many as in an average year.

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