By Maria Martinez

BERLIN (Reuters) – The German economy is expected to contract by 0.2% this year, as stated by the German Chamber of Commerce and Industry (DIHK) on Tuesday, adjusting their previous forecast of stagnation published in May.

The outlook for 2025 is also bleak, with DIHK projecting zero growth. This would mark the third consecutive year without any real GDP growth, according to their estimates.

"We are not just dealing with a cyclical, but a stubborn structural crisis in Germany," said DIHK's managing director, Martin Wansleben, during the presentation of the autumn economic survey for 2024.

Expectations for the upcoming months do not inspire optimism, with the survey indicating that among 25,000 companies from various sectors, 31% foresee a worsening business situation, an increase from 26% in the previous survey. In contrast, only 13% anticipate an improvement.

Wansleben expressed concerns about Germany becoming an economic burden for Europe, stating it can no longer fulfill its role as an economic workhorse.

Of the companies surveyed, 26% reported a good current situation, down from 28% in the summer, while 25% indicated they are in a bad situation, up from 23%.

The industrial sector is facing the most significant challenges, with 35% of companies rating their situation poorly.

"We last had such a situation 20 years ago during the severe crisis in 2002 and 2003. This is a clear alarm signal," Wansleben added, advocating for "profound reforms."

Furthermore, the survey indicated that one-third of companies plan to reduce their investments. In the industrial sector, this figure climbs to 40%.

Wansleben remarked, "The signs of deindustrialization are consolidating. The poor investments show that the industrial value creation base is declining."

The ruling coalition, referred to as the "traffic light" coalition, comprising the centre-left Social Democrats, Greens, and FDP, has varied opinions on the measures needed to boost growth. Chancellor Olaf Scholz from the SPD and Economy Minister Robert Habeck from the Greens have already outlined their economic strategies. Finance Minister Christian Lindner is also preparing his proposals to be presented soon.

"We need a government that is capable of acting," Wansleben emphasized.

In addition to geopolitical issues, companies expressed concerns over the business environment in Germany. The survey revealed that 57% view uncertain economic policy frameworks as a risk; 54% cited labor costs, and 57% pointed to a shortage of skilled workers.