Shadow economy grows to over 500 billion euros - Germany's shadow economy hits €510 billion as unemployment fuels hidden growth
Germany's shadow economy has reached its highest level in over ten years, with €510 billion in 2025. Projections suggest it will climb to €538 billion by the end of this year, a 5.5% increase. Researchers point to weak economic growth and rising unemployment as the main causes of this expansion in the German economy.
A study by Friedrich Schneider, a financial scientist from the University of Linz and the Institute for Applied Economic Research in Tübingen, highlights the rapid growth of Germany's shadow economy. Since 2021, the shadow economy has grown by 2.4 percentage points, three times the average increase seen across 20 major industrialised nations.
By 2026, the shadow economy's share of Germany's official GDP is forecast to rise from 11.4% to 11.6%, adding an additional €9.5 billion in undeclared economic activity. The study also estimates that recent changes, such as the minimum wage hike and expanded earnings thresholds for marginal employment, will add another €2.4 billion to the shadow economy.
The projections assume 1.2% economic growth, 2.9 million unemployed, and a 2.0% inflation rate for 2026. Despite this growth, Germany's shadow economy as a percentage of GDP will remain just below the average of the 20 analysed countries.
Across Europe, Greece is expected to have the largest shadow economy in 2026, at 21.6% of GDP. Switzerland, meanwhile, will have the smallest, at just 5.3%.
The findings suggest that Germany's shadow economy will continue to expand, driven by economic pressures and policy changes. While its share of GDP stays slightly below the industrialised-nation average, the total value is set to rise significantly by 2026.
