The German economy contracted by 0.2% quarter-on-quarter in the final three months of 2024, following a modest 0.1% expansion in the third quarter, and worse than the anticipated 0.1% decline, according to preliminary estimates.
Germany economy shrinks in the fourth quarter
A significant drop in exports was the primary driver of this contraction, which outweighed gains in private and government consumption. On a year-on-year basis, the GDP also shrank by 0.2%. For the full year of 2024, the German economy contracted by 0.2%, following a 0.3% decline in 2023.
German government revised growth forecast
The German government has revised its growth forecast for 2025 down to 0.3% from an earlier projection of 1.1%. The economy minister acknowledged that it is becoming increasingly clear that Germany is grappling with deep-seated structural challenges, such as a shortage of skilled labor, burdensome bureaucracy, and insufficient investment in both the private and public sectors. These issues are contributing to a weakened economic outlook. Additionally, the country is facing significant external pressures, including soaring energy prices, sluggish external demand, and a declining global competitiveness.
Focus on February vote
With parliamentary elections scheduled for February, business leaders are expected to advocate for policy changes, urging the government to address high energy prices and taxes, which are seen as key impediments to growth. The outcome of the election could have significant implications for how Germany addresses these ongoing economic challenges and seeks to stabilize its economy in the years ahead.
