Germany’s economy contracted for the second consecutive year in 2024, marking the longest stretch of economic decline since 1999. The world’s third-largest economy shrank by 0.2% following a 0.3% decline in 2023. This is only the second time since 1950 that Germany’s GDP has contracted for two years in a row, signaling a significant economic downturn.
The contraction is driven by multiple factors, including structural and cyclical pressures. High energy costs, fierce competition from China, and an uncertain economic outlook have all contributed to the recession. The manufacturing sector saw a notable decline of 3.0%, and the construction industry shrank by 3.8%. Meanwhile, the service sector experienced modest growth, expanding by 0.8%, and household consumption expenditure rose by 0.3%, thanks to pay hikes and slowing inflation.
Ruth Brand, President of the Federal Statistics Office, noted, “Cyclical and structural pressures stood in the way of better economic development in 2024.” She highlighted the challenges faced by the German export industry and the impact of high energy costs on the economy.
Economists are concerned that the recession may extend into 2025. Persistent high energy expenses and weak demand for industrial goods could offset potential recovery efforts. The German economy’s prolonged contraction is a significant concern for policymakers and analysts, as they grapple with finding solutions to stabilize and revive economic growth.
In summary, Germany’s economic contraction in 2024 has confirmed a prolonged recession, with multiple sectors facing challenges and uncertainty. This development is a clear indication of the ongoing economic difficulties that the country must address.
Sources:
https://markets.businessinsider.com/news/interestrates/german-economy-stuck-in-recession-1034229816
https://money.usnews.com/investing/news/articles/2025-01-15/german-economy-contracted-0-2-in-2024
https://apnews.com/article/germany-economy-gdp-2024-election-edb9e2d9b4ab5b13c377354b5bfdc904
https://x.com/GlobalMktObserv/status/1879469223488913567
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