German business associations expect layoffs in 2026 amid economic stagnation

By Bahattin Gonultas and Emir Yildirim

BERLIN (AA) — German business associations are bracing for job losses in 2026 due to sluggish growth in the German economy, the rise of global trade protectionism, and weak exports affecting certain sectors.

A survey conducted by the German Economic Institute (IW) among 46 business associations found that 22 expect layoffs next year, according to a report published Monday.

Fifteen associations anticipate that employment levels will remain stable, while only 11 expect investment to increase and 14 expect investment to decrease. Some 21 associations estimate that investments will remain low.

The German economy’s growth—or the lack thereof—and the rising trade protectionism continued to weaken exports, while high internal costs reduced Germany’s competitiveness, the respondent business associations said.

The industrial sector has been particularly hard hit, with the automotive, paper, and textile industries all expecting a drop in production.

“If you hoped for a soon and comprehensive end to the economic crisis, you will be disappointed in 2026,” IW Director Michael Huther said in the report.

While noting that the German economy appears to be stabilizing at a lower level, Huther stressed that “politics still has a lot of work to do” to restore sustainable growth.

Germany’s economy grew by 0.3% in the first quarter of the year but contracted by 0.2% in the second quarter. It narrowly avoided a technical recession in the third quarter, with a growth rate of 0%.

High energy costs, weak global demand, and elevated tariffs have continued to pressure the economy. In addition, China’s shift toward producing goods it previously imported from Germany, as well as chip storage, has led to slowdowns in the auto industry, impacting the economy.

The government promised to overcome the stagnation with a sharp rise in infrastructure and defense spending, but the positive effects have been slower to materialize than anticipated.

The German government also revised its official growth forecast for this year upward from 0% to 0.2% on Oct. 8, while projecting a recovery of 1.3% growth next year and 1.4% in 2027, led by public spending.