01/27/2026, 07:3501/27/2026, 07:35
During the economic crisis, the shadow economy in Germany is flourishing: according to a study, in 2025 it will reach its largest size in more than ten years.
Financial scientist Friedrich Schneider from the University of Linz and the Institute for Applied Economic Research in Tübingen estimate the size of the shadow economy at 510 billion euros. In the current year it will increase by 5.5 percent to 538 billion euros.
The German economy is only growing slowly.Image: DPA
The ratio of the shadow economy to the official gross domestic product will grow from 11.4 to 11.6 percent. This is as high as it was last in 2014, according to calculations available to the German news agency DPA.
The main reason is the low growth of the German economy and increasing unemployment. “This reduces the income from reported employment relationships and creates an incentive for unreported or illegal activities.” As a result of this alone, the shadow economy will increase by 9.5 billion euros in 2026, adjusted for prices.
The increase in the minimum wage at the beginning of the year and the higher earnings limit for marginal employment (mini-jobs) also allowed the shadow economy to grow – by 2.4 billion euros in real terms, according to the study. The reduced sales tax in the hospitality industry, on the other hand, reduces the incentive to do business bypassing the tax office.
The authors define the shadow economy as the sum of undeclared work and income from illegal activities, including gambling and prostitution in certain forms.
Switzerland at the lowest level
According to the study, in terms of the ratio of the shadow economy to economic output, Germany in 2026 will be just below the average of 20 larger industrialized countries. However, the shadow economy in Germany has grown by 2.4 percentage points since 2021, three times as fast as the average for all countries considered (plus 0.8 percentage points).
“This reflects the fact that the economic crisis has hit Germany harder than most of the other countries considered,” say the authors. According to the forecast, the highest level of the shadow economy will be reached in Greece in 2026 with 21.6 percent of economic output, and the lowest in Switzerland with 5.3 percent.
The calculations are based on forecasts for gross domestic product, unemployment and inflation. Economic growth of 1.2 percent, unemployment of 2.9 million people and an inflation rate of 2.0 percent were assumed for 2026. (sda/dpa)