Germany’s Economic Contraction in 2024

Germany, the largest economy in Europe, has contracted for the second consecutive year in 2024, making it the weakest among eurozone countries. The Federal Statistics Office reported that the economy shrank by 0.1% in the last quarter of 2024 and experienced a total contraction of 0.2% for the year.

This decline aligns with analysts’ predictions of a 0.2% drop in GDP for the year. As a major export-oriented economy, Germany faces challenges from weak global demand and increasing competition from Chinese products, resulting in a 0.8% decrease in exports compared to the previous year.

The economy ministry indicated in its monthly report that if negative growth continues into the first quarter of 2025, a winter recession could be on the horizon, defined as two consecutive quarters of economic contraction.

A significant recovery is not anticipated until there is clarity on the economic, financial, and geopolitical landscape, according to the ministry. The global production of industrial products remains modest, and the outlook for German trade appears bleak.

As 2025 progresses, factors that could reduce inflation—such as moderate price trends in upstream economic levels, the after-effects of stringent monetary policies, and lower wage settlements—are expected to become more significant.

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