Baden-Württemberg's economy shrinks for third year in historic slump
Baden-Württemberg has faced a third straight year of economic decline, marking its weakest performance in decades. The region's output fell by 2.6 percent in 2023, leaving it near the bottom of Germany's state rankings. Only Saarland recorded a steeper drop, with its economy shrinking by 0.9 percent last year. The region's last period of growth came in 2022, when output rose by just 0.2 percent. Since then, key sectors have struggled. Industry saw the sharpest decline, contracting by 2.6 percent in real terms. Construction also shrank, adding to the downturn. Service sectors provided a small bright spot, growing by 0.4 percent, but this was not enough to offset wider losses.
With an economic output of €667.1 billion in 2023, Baden-Württemberg still accounts for nearly 15 percent of Germany's total. Yet this dominance has not shielded it from rising unemployment. Jobless rates climbed steadily: 4.2 percent in 2024, 4.5 percent by March 2025, and 4.8 percent in 2026. The trend reflects weaker demand for labour as businesses cut back. Elsewhere in Germany, Mecklenburg-Western Pomerania led growth with a 1.4 percent increase in 2023. The contrast highlights Baden-Württemberg's prolonged slump, now stretching across three years. Economic stagnation has also squeezed disposable incomes and reduced tax revenues, deepening the region's challenges.
Baden-Württemberg now sits second-to-last in state economic rankings, ahead of only Saarland. The recession has raised unemployment, weakened key industries, and limited public finances. Without a turnaround, the region risks further decline in the coming years.
