Germany has secured its place as the world’s third‑largest economy despite an ongoing economic crisis. According to calculations released on Monday by the German Institute for Economic Research (IW), the value of all German goods and services totaled US $5.1 trillion. The United States leads the ranking with US $30.8 trillion, followed by China at US $19.5 trillion.
Japan, with an economic output of US $4.4 trillion, sits just behind the German federation at fourth place. In 2024, Japan had slipped from third to fourth, losing its spot to Germany. Both economies confront similar challenges: rising global protectionism, increasing competition from China and an ageing population.
At the same time, Germany and Japan have been losing dynamism relative to the two leaders. The United States and China are growing far faster, thanks in part to their dominance in high‑tech and artificial‑intelligence sectors and to the size of their domestic markets.
Germany is still expected to keep its third‑place ranking in 2026, driven by a robust industrial base, well‑educated skilled workers and research‑intensive firms. After two weak years, the IW forecasts a modest growth rate of about one percent, supported by state investment. The recovery, however, will remain moderate, with the economy operating under a “handbrake”.
Looking ahead, the IW suggests that by the end of the decade India’s rapidly expanding and populous market could surpass Germany in size. Germany, however, stands to benefit from this shift: a growing Indian market opens additional sales opportunities for “Made in Germany” goods. Thus, strengthening trade ties with India becomes increasingly important.
