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Germany’s economy shrank for the second consecutive year in 2024, underscoring the severity of the decline facing Europe’s manufacturing powerhouse.
The Federal Statistics Office said on Wednesday that Europe’s largest economy shrank by 0.2 percent last year, after contracting by 0.3 percent in 2023. Economists had expected a drop of 0.2 percent.
“Germany is experiencing by far the longest stagnation in its post-war history,” said Timo Wollmershäuser, an economist at Ifo, a Munich-based economic think tank, adding that the country is also significantly underperforming internationally.
Confirmation of that Germany suffering from one of the longest economic crises in decades comes six weeks before a crucial early election.
The campaign was dominated by the spirit of deindustrialization, crumbling infrastructure and whether the country should leave the debt trap that is limiting public spending.
Friedrich Merz, leader of the center-right Christian Democratic Union, who is likely to be Germany’s next chancellor, is campaigning on a reform agenda, promising to cut red tape and taxes and scrap welfare for people who don’t work.
While private sector output declined, government spending rose sharply by 2.6 percent compared to 2023.
Ruth Brand, head of the Federal Statistical Office, blamed “cyclical and structural pressures” for the poor performance, pointing to “increasing competition for Germany’s export industry, high energy costs, interest rate levels that remain high and an uncertain economic outlook.”
In the three months to December, output fell by 0.1 percent compared with the third quarter.
Robin Winkler, chief economist for Germany at Deutsche Bank, said the reduction in the fourth quarter came as a “surprise” and was “worrying”.
“If confirmed, the economy would lose further momentum by the end of the year,” he said, suggesting it was likely driven by “political uncertainty in Berlin and Washington.”
The Bundesbank said last month that stagnation would continue this year, forecasting growth of just 0.1 percent and warning that the trade war with the US would trigger another year of economic decline.
Newly elected US President Donald Trump has promised to impose general tariffs of up to 20 percent on all imports from the US.
Germany is struggling with a crisis in its auto industry fueled by Chinese competition and an expensive switch to electric cars, along with high energy costs and tepid consumer demand.
Production in the manufacturing industry fell by 3 percent, the statistics office announced on Wednesday, while corporate investment fell by 2.8 percent.
Germany has not actually seen significant economic growth since the start of the pandemic, with industrial output hovering more than 10 percent below its peak, while unemployment has started to rise again after falling to record lows.
