IW predicts third year of recession in Germany and unemployment to rise to record high since 2010
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Economists at the Cologne Institute for Economic Research (IW) predict a recession in the German economy in 2025 due to growing trade tensions with the United States, according to a new economic forecast from the IW.

The institute estimates that Germany's GDP could shrink by 0.2% this year. This is the third consecutive year of expected decline – the longest period of decline in German history.

Back in December 2024, IW's forecast was more optimistic – growth of 0.1%, and at the end of April it predicted that the German economy would stagnate this year.

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"The German economy is under enormous pressure," said Michael Grömling, head of IW's macroeconomic department.

The main reason for the deterioration in the forecast was the recent developments in US customs policy, which are causing uncertainty worldwide.

Experts say such policies undermine investment, negatively impact industry, and are the biggest global risk to the economy in 2025.

Unemployment is also expected to rise. The report notes that the number of unemployed in Germany could exceed three million by the summer, a level last seen in 2010.

At the same time, the economies of other major countries, according to IW estimates, are showing positive dynamics. In particular, growth is expected in the US (1.3%), China (4%), and even the eurozone as a whole (0.8%) in 2025 – despite a slowdown in Germany.

At the same time, according to IW calculations, without the US tariff policy, global economic growth in 2025 would likely have been 0.8% higher.

IW experts emphasize that the German economy suffers not only from external factors, but also from internal ones: high taxes, significant business costs, and excessive bureaucracy.