In 2024, Germany’s economy is expected to stagnate despite a strong start to the year, according to the German economic institute IW. The manufacturing and construction sectors are still experiencing a recession, while consumption is predicted to be the only bright spot as inflation eases. However, consumption alone will not be enough to drive a real upswing in the economy. Investments need to pick up, but they are currently depressed due to geopolitical tensions and high interest rates.
Germany’s economy shrank by 0.2% last year, making it the weakest performance among large eurozone economies. Germany is forecasted to see 0% growth this year, lagging behind countries like France, Italy, Britain, and the United States. While Germany managed to avoid a recession at the beginning of the year with a 0.2% growth in the first quarter, the economy had shrunk by 0.5% in the last quarter of 2023. The German government predicts 0.3% GDP growth for this year.
According to IW, foreign trade is expected to remain weak and provide little economic stimulus in 2024. The unemployment rate in Germany is projected to increase to 6% on average for the year, up from 5.7% in 2023. Despite a record number of 46 million employed people in 2024, the effects of economic weakness on the labor market in Germany are becoming more evident. A policy boost that improves business conditions is needed to prevent wasting the country’s economic potential.
Despite some bright spots such as lower inflation and stable consumer spending patterns, Germany’s economy remains under pressure due to several factors such as geopolitical tensions and high-interest rates that have led investments downward.
The German government must take immediate action if it wants its economy to get back on track in time for future years
