In the evening, the skyscrapers of the Frankfurt skyline are visible with the Deutsche Hern Bridge in the foreground.
Frank Lumpenhorst | Picture Alliance | getty images
According to data from German statistics office Destatis, the German economy shrank by 0.2% in 2024, marking the second consecutive year of economic slowdown.
The decline was in line with the expectations of economists polled by Reuters, according to LSEG data. The European Commission and a group of leading German economic research institutes have both independently predicted a 0.1% decline in German GDP in 2024.
Ruth Brand, head of Statistics Germany, said “cyclical and structural pressures” were holding back economic development.
“These include increased competition for Germany’s export industries in key sales markets, high energy costs, still high interest rates and an uncertain economic outlook,” she said in a statement.
Destatis said both the manufacturing and construction sectors suffered in 2024, but the services sector recorded growth during the period.
The country has been experiencing a long-standing housing construction crisis due to high interest rates and construction costs. Several key German industries, including the automotive sector, have also been under pressure for some time. Automakers are struggling with the shift to electric vehicles and competition from Chinese companies.
German stock index DAX was last to rise after the data was released, up 0.47% at 10:24 a.m. London time after already starting the day in positive territory.
The German economy has already contracted by 0.3% in 2023.
4th quarter
Destatis also released its first figures for fourth quarter gross domestic product (GDP) on Wednesday based on information currently available. In the three months to the end of December, the economy fell 0.1% compared to the previous quarter, adjusted for inflation, seasonal and calendar changes. Destatis said the first regular figures for Germany’s fourth-quarter GDP will be published later this month.
Robin Winkler, Deutsche Bank’s chief German economist, said on Wednesday that the annual GDP contraction was not a surprise to anyone, but the preliminary figures for the fourth quarter of 2024 were unexpected and worrying.
“If confirmed, this would mean that the German economy has lost momentum again with the onset of winter,” he said in comments translated by CNBC. “The current political uncertainty in Berlin and Washington will likely be an important factor.”
German economic research institute Ifo warned Wednesday that Germany’s economy will struggle to “get out of recession” in 2025 if economic policy reforms are not introduced, under which scenario it expects “recognizable growth” of 0.4% over that period. . .
“We are concerned that if no countermeasures are taken, manufacturers will continue to shift production and investments overseas,” the institute said in a statement. “Productivity growth will also remain weak as value added and employment in highly productive industries will be replaced by value added in the services sector, where productivity growth will be low.”
If the “right” policies are introduced, investing and working in Germany could once again become a more viable option and the economy could grow by up to 1%, Ifo added.
