Germany facing historic slump: DIHK warns of third year of crisis

Germany facing historic slump: DIHK warns of third year of crisis

The German Chamber of Commerce and Industry (DIHK) warns of an impending economic downturn. On May 27, 2025, DIHK General Manager Helena Melnikov said that a quick economic recovery in Germany was not in sight. There are fears that the country's economic output will decline for the third time in a row this year. For 2023, the DIHK forecasts a decline in gross domestic product (GDP) of 0.3 percent, which is a pessimistic assessment compared to the federal government and the “economists”, who assume that GDP will stagnate in 2025.

A current DIHK economic survey, which included more than 23,000 companies, illustrates the poor mood in the economy. Only a quarter of companies rate their business situation as good, while the majority assume a more pessimistic outlook for the coming months. In particular, 60 percent of those surveyed identify the economic policy framework as the greatest risk for their business.

Difficult conditions for companies

The survey also shows that 28 percent of companies expect exports to fall, while only 20 percent expect sales to increase. High labor costs, rising social security contributions and energy and raw material prices are making the situation increasingly difficult. Almost 40 percent of companies plan to reduce their investments, while only 22 percent plan to invest more. This could have a negative impact on the competitiveness of the domestic industry, which is already under pressure.

Another alarm sound from Melnikov concerns the investment backlog. Companies mostly concentrate on replacement investments, which are, however, not sufficient for long-term competitiveness. In industry, only 19 percent of companies rate the current business situation positively, indicating a challenging time for the sector. While 26 percent of companies report a good business situation overall, 25 percent are dissatisfied.

Need for reforms

In order to stabilize the economic situation, Melnikov calls for urgent action in economic policy. The proposals include reducing electricity tax to the European minimum level, easing depreciation and reducing bureaucracy. Comprehensive structural reforms are necessary for the planned loan-financed special fund of 500 billion euros for infrastructure and climate protection in order to implement effective measures.

The DIHK sees this as an opportunity for industry and the construction sector to benefit from investments. A comprehensive policy is also called for that creates a growth-friendly environment to secure jobs and prosperity. The pressure to reform is high and companies' concerns must be taken seriously in order to break the negative spiral.

Overall, Germany is in one of the most challenging phases of its post-war history, with the prospect of a third year of crisis in a row.