Despite a continuing economic crisis, Germany secured its place as the world’s third‑largest economy in 2025. According to calculations released on Monday by the German Institute for Economic Research (IW), the value of all German goods and services reached $5.1 trillion. The United States tops the ranking with $30.8 trillion, followed by China at $19.5 trillion.
Japan, with a GDP of $4.4 trillion, sits in fourth place, just behind Germany. In 2024 Japan slipped from the third spot to behind the German economy. Both nations grapple with similar challenges: increasing global protectionism, mounting competition from China, and an ageing population.
At the same time, Germany and Japan have been losing dynamism relative to the two leading economies for some time. The United States and China are growing substantially faster, driven in part by their leadership in high‑tech and artificial intelligence, as well as by their large domestic markets.
Nevertheless, Germany is expected to keep its third‑place position into 2026. Its strong industrial base, highly skilled workforce, and research‑intensive firms provide a solid foundation. After two weak years, the economy should grow by about 1 percent in 2026, according to IW forecasts, supported by state investment. However, the recovery remains modest, and the business cycle continues with a mild slowdown.
Looking forward, the IW projects that by the end of the decade India’s rapidly growing and populous market could overtake Germany. Yet this shift could also benefit Germany: a larger Indian market would offer new sales opportunities for “Made in Germany” goods. Therefore, deepening trade ties with India is increasingly important.