Despite downturns and stagnation, Germany remains the world’s third largest economy for the third year running, according to a new study. But India is expected to jump ahead by the end of the decade.
Although we’ve heard doom and gloom about Germany’s faltering economy of late, it’s still ranks among the world’s largest.
With a gross domestic product (GDP) totalling around $5.1 trillion in 2025, Germany maintains its third place in the list of the world’s largest economies, according to a recent study by the German Economic Institute (IW).
The US leads the ranking with a GDP total of $30.8 trillion reported in 2025, followed by China with $19.5 trillion.
Japan and Germany falling behind
Japan ranks fourth with an economic output of $4.4 trillion, just behind Germany. In 2024, Japan officially fell behind Germany.
Experts say that both economies are facing similar challenges: which include increasing tariffs and regulations, growing competition from China and an ageing population.
READ ALSO: Trump tariff threats ‘poison’ for Germany’s recovering economy
As The Local has reported, Germany has been easing visa and residency rules to try and attract more skilled workers in an effort to offset workers aging out of the workforce.
“Both Germany and Japan are falling behind the two largest economies, which have been growing much more dynamically for some time now,” said study author IW Chief Economist Michael Grömling.
The IW referenced the US and China’s “leadership in high-tech and artificial intelligence”, as well as their large domestic markets as reasons for their growth.
“They are currently outpacing other major economies,” said Grömling.
READ ALSO: Which job sectors in Germany need the most skilled workers?
Germany must strengthen trade agreements, say experts
The study notes that Germany is likely to retain its third place in 2026 thanks to its strong industrial base, well-trained workforce and research-intensive companies.
After two weak years, the economy is expected to grow by around one percent with the help of government investment, according to IW forecasts.
However, the recovery will remain moderate, with the economy continuing to run at a slow pace.
Looking ahead, industry experts say they expect rapidly growing and populous India to overtake Germany by the end of the decade. But Germany may also benefit from this.
“A stronger growing Indian market opens up additional sales opportunities for goods ‘Made in Germany’,” the study says. “This makes it all the more important to expand trade with India even further.”
In January, German Chancellor Friedrich Merz visited India to increase trade and security partnerships.
A government spokesperson said the fact that Merz chose India for his first trip to Asia as chancellor “demonstrates how India, the world’s largest democracy, is an important strategic partner for Germany”.
READ ALSO: Germany’s Merz heads to India to bolster trade and security ties
Disclaimer : This story is auto aggregated by a computer programme and has not been created or edited by DOWNTHENEWS. Publisher: thelocal.de
