Economic Key Facts Germany

With a gross domestic product of EUR 4,305 billion 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 the future, however, India is expected to pull ahead of Japan and Germany. Exports of cars and car parts and chemical products in particular 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).

Data retrieved: 10 October 2025

In their joint economic forecast, the major German economic institutes currently see no signs of a short-term economic recovery. After two years of declining economic output, the German experts expect only a slight increase of +0.2% for 2025. For the following years, 2026 and 2027, they expect moderate growth of +1.3% and +1.4% respectively. According to the institutes' latest autumn report, the German economy appears to have bottomed out, but they are still calling for comprehensive reforms from the German government.

According to the report, an important stimulus for the economy could come from an expansive spending policy. This refers to the special fund of 500 billion euros, which is financed by loans and is intended to enable additional investment in infrastructure and climate protection over a period of twelve years. Plans include the repair of dilapidated transport routes, educational facilities and digital infrastructure as well as better equipment for daycare centers. Bureaucratic hurdles in planning and approval are to be reduced in order to be able to use the funds quickly. In addition, the German government is making 500 billion euros available over the next five years via the defense budget and a special fund to invest in strengthening national and alliance defense. The institutes see this as providing a noticeable boost to the domestic economy.

At the same time, however, they warn of long-term risks: High energy prices, rising labor costs, the shortage of qualified specialists and declining competitiveness in international comparison are considered to be key braking factors for Germany's economic development. These structural weaknesses could continue to weigh on growth prospects in the medium and long term. This is particularly evident in the fact that demand from abroad for German products is declining.

The mood among companies in Germany has also deteriorated. The ifo Business Climate Index fell to 87.7 points in September 2025, down from 88.9 points in the previous month of August. Companies were less satisfied with current business and their expectations also deteriorated. Hopes of a rapid economic recovery have been dampened.

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

According to the OECD, the share of tax and social security contributions in total labor costs for average earners in Germany in 2024 was 47.9% for singles without children. This puts Germany in second worst place among the 38 OECD member states after Belgium and well above the OECD average of 34.9%, which weighs on Germany's attractiveness as an investment location. The rate is also significantly lower in countries outside the EU, such as the UK (29.4%) or the USA (30.1%).

Current forecasts by German economic research institutes and government organizations for GDP growth in Germany have recently fluctuated between +/-0.0% and +0.3% for the calendar year 2025 and between +0.7% and +1.7% for the calendar year 2026:

Our Business Destination Germany 2024 study provides an assessment of Germany as a business location by international investors. 350 CFOs from the largest German subsidiaries of international corporations from the most important investor countries were surveyed as part of the study to find out how they rate Germany as a business location. As this is the fourth time the study has been published every two years, it also enables trend statements to be made.

The KPMG Global Navigator also provides insights into global growth prospects, opportunities and challenges.

Our CEO-Outlook 2024/25, for which 1,325 CEOs of large companies around the world were surveyed, including 125 CEOs in Germany, also provides assessments of the economic situation, generative AI, ESG and other current topics.

Our Future Readiness Monitor 2025, for which 570 top decision-makers in the German economy were surveyed, provides an assessment of German companies' own future viability in the face of new opportunities and complex tasks, their investment plans and their assessment of trends in the coming years.

In August 2025, German exports fell by -0.5% and imports by -1.3% compared to July 2025, adjusted for calendar and seasonal effects. Compared to August 2024, exports decreased by -0.7% and imports increased by +3.5%.

Adjusted for calendar and seasonal effects, goods worth 129.7 billion euros were exported from Germany and goods worth 112.5 billion euros were imported into Germany. The foreign trade balance therefore closed with an export surplus of 17.2 billion euros in August 2025.

Data retrieved: 10 October 2025

Although most German exports continued to go to the United States, calendar and seasonally adjusted -2.5% fewer goods were exported there in August 2025 than in July 2025. Exports to the USA therefore fell to €10.9 billion. This is the fifth consecutive monthly decline and the lowest value since November 2021 (€10.3 billion). Compared to the same month in the previous year, August 2024, exports to the United States even fell by -20.1% on a calendar and seasonally adjusted basis.

Real (price-adjusted) new orders in the manufacturing sector fell by -0.8% in August 2025 compared to July 2025, adjusted for seasonal and calendar effects. Excluding large orders, it was even -3.3% lower than in the previous month. In a less volatile three-month comparison, incoming orders from June 2025 to August 2025 were -2.3% lower than in the previous three months.

Inflation in Germany is on the rise. In September 2025, the price of goods and services rose by +2.4% compared to the same month last year. This is the highest figure since last December.

Energy became cheaper again: it cost -0.7% less than a year earlier. Services increased in price by +3.4% on average. Food cost +2.1% more. The inflation rate excluding food and energy, often referred to as core inflation, rose from 2.7% to 2.8%.

The European Central Bank has lowered its key interest rate eight times since last year due to the easing price pressure, but has paused since July, in particular due to the price data from Germany.

Current forecasts by German economic research institutes and government organizations on the development of the inflation rate in Germany indicate that the annual average will be slightly lower than the current level. The projections for the calendar year 2025 fluctuate between +2.0% and +2.4%:

The normal autumn upturn has caused the number of registered unemployed in Germany to fall below three million again in September 2025. It fell by 70,000 to 2.955 million. Compared to the previous year, this was 148,000 more unemployed people. The unemployment rate fell slightly month-on-month by -0.1 percentage points to 6.3%.

However, the structural challenges are still noticeably slowing down the labor market. The necessary impetus for a stronger recovery is still lacking. The number of unemployed could exceed the three million mark again as early as this winter. It is not just companies' demand for new workers that is weakening - the chances of finding a new job are also lower than at any time during the pandemic.

In 2024, the Federal Statistical Office recorded more than half a million university degrees in Germany: a total of 511,600 people successfully completed their studies or doctorate - an increase of +1.9% compared to the previous year. This figure includes graduates from the winter semester 2023/2024 and the summer semester 2024.

Growth was particularly strong in the teaching degree area: Prospective teachers accounted for around ten percent of all degrees. The number of doctorates also increased significantly - it was +6% higher than in the previous year.

Almost half of the graduates obtained a Bachelor's degree, which corresponds to a share of 48% and is therefore on a par with the previous year. The proportion of Master's degrees also remained constant at 29%.

The most popular fields of study in 2024 were law, economics and social sciences. This group of subjects accounted for around 41% of university degrees. Engineering followed with a share of around 25%. Other frequently chosen subject areas were mathematics and natural sciences (11%) and the humanities (9%).