Forecasting Germany's Economic Future: IW Predicts Rising Unemployment Amid Trade Tensions
Increase in joblessness predicted as a result of trade conflict, according to experts - Customs disagreement leads to increase in jobless individuals, according to researcher at IW
Germany's economy is on the verge of a contraction, with the Institute of the German Economy (IW) predicting a 0.2% decline for the year, leading to an unsettling increase in unemployment to three million. This unfavorable state is primarily attributed to the heated trade conflict initiated by the U.S. government [1].
With global uncertainties, persistently low investments, and high location costs, plus the lingering hesitation amongst German consumers to make substantial purchases, the nation appears to be plunging further into recession [1].
The Looming Unemployment Crisis
IW's predictions suggest that these economic conditions have already started affecting the labor market. The number of employed individuals has been decreasing since mid-2024, with a possible three million jobless nationwide come summer - a statistic last seen in 2010 [1].
U.S. Trade Policy: The Greatest Risk
The IW identifies U.S. trade policy as the most significant threat to the global economy this year. It is estimated that without the current U.S. trade policies, global economic output might have been up to 0.8% higher in 2025 [1]. This highlights the detrimental impact of protectionist trade policies on a global scale.
According to IW's assessment, international uncertainty tends to discourage companies from making crucial investments, such as those in new machinery and vehicles [1].
The Grim Situation for Industry and Construction
Industrial and construction sectors are bracing themselves for challenging times. A 3% decline in 2024 has put immense pressure on industrial companies, as they struggle against high energy prices, rising wages, and various regulations [1]. Construction companies face further restrictions after a 3.7% decline in 2024, with high construction costs due to regulations acting as a barrier to economic recovery [1].
However, there is a glimmer of hope, as the new government has the potential to steer the economy towards recovery by employing quick planning procedures in utilizing the infrastructure special fund [1].
[1] https://www.bloombergquint.com/global-economics/ireland-germany-japan-economy[2] https://www.reuters.com/business/germany-cuts-gdp-growth-2025-zero-amid-rising-risks-2021-09-17/[3] https://www.conference-board.org/economic-indicators/germany-lead-economic-indicators?month=12&year=2024[4] https://www.statista.com/statistics/1203912/germany-unemployment-rate-seasonally-adjusted/
Keywords:
- IW
- Economic research
- Trade disputes
- Institute of the German Economy
- Cologne
- Germany
- Global economy
- Recession
- Unemployment
- GDP growth
- Industry
- Construction
- Fiscal stimulus
- Infrastructure investments
In face of the anticipated rising unemployment in Germany, it may be necessary for the new government to implement community policy initiatives that prioritize vocational training programs, as this could potentially help the unemployed gain necessary skills for re-employment in the workforce. This economic situation necessitates a careful review of Germany's employment policy in order to address the impending job crisis. Meanwhile, finance institutions and businesses should closely monitor these developments in order to plan and make informed decisions regarding their investment strategies in Germany and the global economy.
