Germany’s economy, the largest in Europe, has recorded its second consecutive year of contraction, with GDP shrinking by 0.2% in 2024, following a 0.3% decline in 2023, according to data released by the Federal Statistics Office (Destatis) on Wednesday.
“Cyclical and structural pressures stood in the way of better economic development in 2024,” said Ruth Brand, a Destatis official, during a press conference in Berlin. Key factors cited include high energy costs, increasing competition for German exports in key markets, and persistently high interest rates.
The manufacturing sector experienced a significant decline, with output falling by 3.0%. Key industries, including machinery, automotive, and energy-intensive sectors such as chemicals and metals, were particularly affected. The construction industry also faced challenges, with gross value added dropping by 3.8%, largely due to high construction costs and elevated interest rates. Residential construction saw a steep decline, though infrastructure projects like roads and pipelines provided a slight offset.
The service sector grew by 0.8%, driven by gains in retail and transport services, as well as a 2.5% increase in the information and communication sector. Public administration, education, and healthcare also registered a combined growth of 1.6%.
The economic decline comes as Germany prepares for a snap election, with economic reform and recovery high on the political agenda. Analysts point to stagnating growth, a weakening automotive sector, and geopolitical risks as key obstacles to recovery.
The upcoming election presents a critical opportunity for new leadership to introduce reforms aimed at attracting structural investments, addressing high energy costs, and ensuring long-term economic stability. Without such measures, experts warn, Germany risks prolonged economic malaise.
