Germany in crisis: Unemployment could reach record levels in summer 2025!

Germany in crisis: Unemployment could reach record levels in summer 2025!

The German economy is facing a tense situation in 2025: According to an economic forecast by the German Economic Institute (IW), a decline in gross domestic product of 0.2 percent is expected. This is an alarming development, especially in the context of rising unemployment, which experts estimate could rise to three million. IW economics chief Michael Grömling makes it clear that the German economy is particularly suffering from the consequences of the US tariff conflict and emphasizes the responsibility that the new government has in tackling the challenges.

The effects of the tariff war are already noticeable: the number of people in employment has been shrinking since mid-2024, and international uncertainty is slowing companies' willingness to invest. The greatest risk to the global economy remains US trade policy, and without this, global economic strength could be up to 0.8 percent higher Mercury reported. Industry and construction are particularly affected, as they were already faced with significant declines in 2024.

A look at the key sectors

The industry is forecasting a decline in value added, having already recorded a 3 percent decline in 2024. Construction companies also have to prepare for further restrictions after suffering losses of 3.7 percent last year. High location costs and cautious consumer attitudes among Germans are putting additional pressure on the economic situation. The IW analysts note that construction costs and numerous regulations are particularly slowing down the economy.

However, compared internationally, moderate growth is expected: the euro area is expected to grow by 0.8 percent in 2025, and the USA is expecting growth of 1.3 percent. China is expected to grow by as much as 4 percent, despite the ongoing tariff war. This shows that the German economy is facing a difficult global environment in which the pressure on domestic companies is continually increasing, while countries such as China and the USA are finding alternative ways to stabilize their economies.

Outlook and measures

Experts emphasize the need for quickly accessible special infrastructure funds that could stimulate the economy. The new developments can be decisive in stopping the negative dynamics and providing positive impulses. In view of the looming recession and the high number of unemployed, both political and economic strategies must be reconsidered in order to secure Germany's competitiveness in the long term.

In these uncertain times, a fundamental rethink is required in order to successfully meet the challenges of the global economic situation and our own economic structure. It remains to be seen how the situation will develop over the course of the year and what measures the government and companies will take. Further information about the forecasts can also be found at Mirror.