A Gloomy Economic Outlook: IW Predicts Unemployment Surge in Germany due to Trade Disputes
Increase in Unemployment Attributed to Trade Disputes, According to Research Findings - Customs disagreement leads to increase in unemployment, reports IW researcher
Now, get a dose of reality: that German economic growth might dip by 0.2% this year, according to the IW (Institute for Economic Research) in Cologne. This may lead to an increase in unemployment figures, reaching a daunting 3 million. And what's fueling this economic downturn? You guessed it - the ongoing trade conflict initiated by the US government.
Global uncertainties, minimal investments, and cautious German spending habits don't make things any better. IW isn't pulling any punches when they say the country's in a recession. The gross domestic product (GDP) had already taken a 0.2% hit in 2024.
As for the employment scenario, it's been on a downward spiral since mid-2024. IW predicts that this summer, unemployment could reach staggering levels, reminiscent of numbers last seen in 2010.
So, what's got the world economy cowering in fear? US trade policy. IW warns that if the US trade policy was non-existent, economic growth in 2025 could jump up by 0.8%, according to IW's economic researchers.
Uncertainty on an international scale is another factor at play here. It's a major deterrent for businesses when it comes to investing. And the larger the investments, the more companies hesitate - think new machinery, vehicles, and the like.
Industry and construction aren't in the best shape either. With high energy prices, escalating wages, and a plethora of regulations bearing down on them, industrial companies might struggle to generate value this year. The construction sector isn't faring any better, with further restrictions on the horizon after a loss of 3.7% in 2024 due to exorbitant construction costs.
But there's a glimmer of hope on the horizon. Michael Grömling, head economist at IW, believes the new government presents a golden opportunity for a turnaround. If they play their cards right, the economic stimulus package could serve as a catalyst for economic growth, if swift action is taken.
In the face of this gloomy economic outlook, it's essential for the new government to review and implement acute changes in the community policy and employment policy to alleviate the surge in unemployment, which IW predicts could reach 3 million. To revitalize the economy, vocational training programs could be expanded to equip the workforce with necessary skills, encouraging employment and business growth. Moreover, addressing financial concerns related to international uncertainty and minimizing risks for businesses, particularly in industries and construction sectors, that are struggling with high costs and regulatory burdens, is crucial in stimulating investments and economic growth.
