The German government has lowered its growth forecasts for the Old Continent’s largest economy, which is now expected to record a GDP contraction of 0.2% in 2024, after the 0.3% drop in activity in 2023, thus accumulating two consecutive years of recession. for the first time since 2002 and 2003. The Bundesbank itself approves of the possibility of a recession that the government expects.
If the forecasts of the German executive, announced this Wednesday by the Ministry of the Economy, finally come true, Germany would experience two consecutive years of recession for the first time since the turn of the centuryafter a contraction of 0.2% in 2002 and 0.5% in 2003, and would be the only G7 country in recession this year.
“The German economy is increasingly affected by structural factors linked to demographic change, a more difficult competitive position and geoeconomic fragmentation,” explained the German ministry. The Government notes several “evils” such as the persistent weakness of domestic and external demand, as well as the continuation of restrictive monetary policy, which “weigh on economic development” and on the wealth of the country itself in relation to the economies South. .
Likewise, he expressed that indicators such as industrial production and business climate suggest that economic weakness will continue in the second halfwhile by the end of the year, growth dynamics are expected to “gradually recover”, with lower inflation translating into higher real incomes, as well as lower interest rates.
Thus, the German government now expects that the GDP of The “European locomotive” will contract by 0.2% in 2024, after a drop of three tenths in 2023compared to the growth of 0.3% which was anticipated last spring. For next year, Berlin is confident that GDP will increase by 1.1% and accelerate its expansion to reach 1.6% in 2026.
“This year we do not expect any growth, or even a recession, given that the second half of the year is expected to be significantly weaker than we thought six months ago,” Bundesbank President Joachim Nagel said on Wednesday. .
The head of the German central bank highlighted that uncertainty is the reason preventing greater consumption and investment, a circumstance which would coincide with “weak” external demand.
In this sense, the German government estimates that at the beginning of 2025, activity should regain strength with the resumption of private consumption, as well as demand for foreign industrial products and investments. Looking ahead to 2025, Nagel described 1% potential growth “clearly insufficient” that Germany could score.
“The German economy has not experienced strong growth since 2018. In addition to economic risks, Germany’s structural problems are now influencing it, in the midst of major geoeconomic challenges,” acknowledged the Minister of Foreign Affairs. ‘Economy Robert Habeck at a press conference. and Europe finds itself stuck between China and the United States in the midst of a crisis.
During his speech, the German minister defended the structural actions promoted by the Executive, in particular those aimed at ensuring energy supply and speeding up procedures to reduce bureaucracy and the shortage of labor and workers. qualified.
He also recalled that, to address economic and structural challenges, the federal government had also agreed on a comprehensive package of measures to strengthen Germany as an economic location through the growth initiative.
