In 2024, the German economy experiences another annual slowdown, with a contraction of 0.2%.

• The statistics office Destatis revealed on Wednesday that the German economy shrank by 0.2% in 2024.
• The country has experienced its second consecutive annual economic slowdown, as predicted by economists surveyed by Reuters.
• The country of Germany has been grappling with economic difficulties, such as a persistent housing crisis and intense competition in the automotive sector.

In 2024, the German economy contracted by 0.2%, marking the country's second consecutive year of slow growth, according to data from the statistics office Destatis.

According to LSEG data, the drop in line with economists' expectations, as forecasted by the European Commission and Germany's leading economic institutes, was a 0.1% dip in the German GDP in 2024.

The German statistics agency's president, Ruth Brand, stated that "economic development" was hindered by "cyclical and structural pressures."

The German export industry faces challenges such as increased competition on key sales markets, high energy costs, high interest rates, and an uncertain economic outlook, as stated.

While the manufacturing and construction sectors experienced decline in 2024, the services sectors experienced growth.

The country has been grappling with a persistent housing crisis, which has been linked to rising interest rates and construction expenses. Additionally, several of Germany's major industries, such as the automotive sector, have been facing challenges for some time. Car manufacturers have been facing difficulties in shifting to electric vehicles and are also facing competition from Chinese manufacturers.

The DAX stock index in Germany reached its highest point after data release, increasing by 0.47% at 10:24 a.m. London time, following a positive start to the day.

Germany's economy had already contracted by 0.3% in 2023.

Fourth quarter

On Wednesday, Destatis released an early estimate of Germany's GDP in the fourth quarter, which showed a 0.1% decline in the three months ending December, after adjusting for price, seasonal, and calendar variations. The regular first reading of the GDP for the fourth quarter will be released later this month, according to Destatis.

On Wednesday, Robin Winkler, Deutsche Bank's chief Germany economist, stated that while the annual GDP contraction was anticipated, the preliminary reading for the fourth quarter of 2024 was unexpected and concerning.

The German economy may have lost momentum at the start of winter, according to a statement made by someone. The political uncertainty in Berlin and Washington is likely to have contributed to this, as stated in translated comments by CNBC.

The German economy may not be able to escape stagnation by 2025 if economic policy reforms are not implemented, according to the German economic institute Ifo. In this case, the institute predicts a perceptible growth of 0.4% over the period.

"The institute stated that if no countermeasures are taken, manufacturing companies will continue to relocate production and investments abroad, resulting in weak productivity growth and replacement of highly productive industries with service sectors with low productivity growth."

Introducing the right policies could make investing and working in Germany a more viable option, potentially expanding the economy by up to 1%, according to Ifo.