Germany slashes 2024 forecast as economic woes deepen
Stubbornly weak domestic and foreign demand, high interest rates and costly energy have all weighed heavily on the German economy.
Germany's Economy and Climate Minister Robert Habeck holds a press conference about the autumn economic projection, in Berlin, Germany, October 9, 2024. / Photo: Reuters
The German government on Wednesday slashed its 2024 forecast for Europe's largest economy, saying it will contract for a second straight year before a recovery gets under way in 2025.
Output is expected to shrink by 0.2 percent in 2024, the economy ministry said in a statement, a sharp downgrade from the 0.3-percent expansion previously forecast.
Germany's economy stalled in the first half of the year and a slew of disappointing indicators recently suggest "the economic weakness will persist into the second half of the year", it said.
Germany was already the only major advanced economy to fall into recession last year when it contracted by 0.3 percent, acting as a drag on the wider eurozone.
Stubbornly weak domestic and foreign demand, high interest rates and costly energy in the wake of Russia-Ukraine conflict have all weighed heavily on the German economy — particularly its crucial manufacturing sector.
At the same time, the country faces structural challenges including an ageing population, increased competition from China, burdensome bureaucracy and a complex green transition.
"Germany's structural problems are now taking their toll," Economy Minister Robert Habeck said.
"And this is happening amid major geo-economic challenges. Germany and Europe are caught in the middle of crises between China and the United States and must learn to assert themselves," he added.
Germany's woes were highlighted by a spate of bad news from the country's carmakers recently, as the flagship industry struggles with rising production costs and fierce competition from Chinese manufacturers on electric vehicles.
Volkswagen, Europe's biggest auto manufacturer, last month cut its annual outlook and said it would for the first time have to consider closing factories in Germany.
Rivals BMW and Mercedes-Benz have also lowered their outlook, citing falling Chinese demand.
Habeck warned that a Donald Trump victory in next month's US presidential election could worsen the problems for the German auto industry.
Trump has said he plans to levy tariffs on all foreign imports, including cars.
"We will then face ever greater problems, so you have to see that with great concern," said Habeck.
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