Skyscrapers of Frankfurt’s skyline in the evening, Deutschhernbrücke in the foreground.
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Germany’s economy will contract by 0.2% in 2024, data from statistics agency Destatis showed on Wednesday, making the country’s second consecutive year-on-year slowdown.
The decline was in line with expectations from economists polled by Reuters, according to LSEG data. The European Commission and a group of Germany’s main economic institutions each independently predicted that Germany’s gross domestic product (GDP) would fall by 0.1% in 2024.
Ruth Brand, head of Germany’s statistics office, said “cyclical and structural pressures” were holding back strong economic development.
“These include increased competition in Germany’s export industry in key sales markets, high energy costs, persistently high interest rates and an uncertain economic outlook,” he said in a statement.
Destatis said that in 2024, both the manufacturing and construction industries suffered, but the services sector recorded growth during this period.
The country is facing a prolonged housing construction crisis due to rising interest rates and construction costs. Several key industries in Germany, including the automotive sector, have also been under pressure for some time. Automakers are struggling with the transition to electric vehicles and competition from Chinese automakers.
The German stock index DAX was the last to rise after the data release, rising 0.47% at 10:24 a.m. London time, after already starting the day in positive territory.
Germany’s economy was already set to contract by 0.3% in 2023.
4th quarter
Destatis also released early opening figures for fourth-quarter gross domestic product (GDP) on Wednesday, based on currently available information. Economic growth in the three months to the end of December fell 0.1% from the previous quarter, adjusting for price, seasonal and calendar fluctuations. Destatis noted that the regular first figures for Germany’s GDP for the fourth quarter will be released later this month.
Robin Winkler, chief German economist at Deutsche Bank, said on Wednesday that while the annual GDP contraction should not be a surprise to anyone, preliminary figures for the fourth quarter of 2024 are unexpected and worrying. said.
“If confirmed, it would mean that the German economy lost momentum again at the beginning of winter,” he said in comments translated by CNBC. That’s probably a factor.”
Looking ahead, Germany’s economic research institute Ifo warned on Wednesday that unless economic policy reforms are introduced, the German economy will struggle to “come out of stagnation” in 2025, and the agency expects this scenario to last for a period of time. It is expected that there will be “measurable growth” of 0.4% in 2020.
“Researchers are concerned that unless action is taken, manufacturers will continue to move production and investment overseas,” the institute said in a statement. “Productivity growth will also remain weak as value added and employment in high productivity industries is replaced by value added in the service sector, where productivity growth is low.”
Nevertheless, if the “right” policies are put in place, investing and working in Germany will once again become a more viable option, and the economy could expand by up to 1%, the IFO added.
