Germany’s economy is expected to shrink by 0.1 percent in 2024, following a 0.3 percent contraction last year, according to leading economic institutes.
A survey by the Ifo Institute revealed that business sentiment worsened for the fourth consecutive month in September, with the decline more pronounced than anticipated. Business activity also contracted at its fastest rate in seven months, signaling further downward pressure on GDP.
Despite signs of easing inflation, consumer demand remains weak, weighed down by high energy costs, weak industrial orders, and rising interest rates.
Economic outlooks for the coming years have been downgraded with experts now predicting the economy will grow by only 0.8 percent next year, down from earlier forecasts of 1.4 percent. Growth in 2026 is expected to reach 1.3 percent. However, frequent revisions to predicted economic growth forecasts have seen confidence in such targets plummet.
The German Ministry of Economy, however, remains out on a limb in predicting growth this year of 0.3 percent, although it is expected to provide a formal update on its forecast next month.
Figures published at the end of July by the German Statistical Office showed the country’s debt level had reached a new record high of €2.45 trillion by the end of 2023 — €77 billion more than 2022.
That debt is equivalent to a per capita debt of around €28,900, driven primarily by funding the war in Ukraine, rising energy costs, and a record level of social welfare.
Add to this the fall in manufacturing orders and the number of bankruptcies sky-rocketing by 30 percent in the first half of this year, the German economy is a recipe for stagnation at best and recession a far more likely scenario in the near future.
