The German government has revised down its economic growth forecast for 2024 to -0.2%, but expects the economy to begin recovering next year.

On Wednesday, October 9th, the German government revised its GDP forecast for this year to -0.2%. The largest economy in Europe is struggling to escape a prolonged stagnation and faces the predicament of a consecutive two-year economic downturn. Robert Habeck, Germany's Minister of Economy, stated in an email that a slow recovery is expected to continue into next year, with a growth rate of 1.1% in 2025 and an acceleration to 1.6% in 2026. Previously, in April, Habeck had forecast a GDP growth of 0.3% for this year. Last year, Germany's GDP decreased by 0.3%.

Analysts from Bloomberg believe that the German economy may already be in a technical recession, with a possible further contraction in the third quarter following a 0.1% decline in GDP in the second quarter.

Habeck emphasized the urgent need to address Germany's long-standing "structural issues." These issues include insufficient energy security, excessive bureaucracy, a shortage of skilled workers, and, coupled with geopolitical uncertainties, have put significant pressure on economic activity.

Advertisement

Peter Adrian, chairman of the German DIHK industrial lobby organization, called on the government to further reduce bureaucracy and lower energy prices for small and medium-sized enterprises in Germany. He pointed out that these companies pay four times the electricity costs of their competitors in other industrial nations.

"We are currently experiencing a situation where businesses are moving abroad, domestic industrial production is decreasing, and the number of business closures and bankruptcies is increasing. The alarm bell can hardly ring any louder! Even though many people are no longer willing to listen, on the issue of bureaucracy, there is only one direction in the foreseeable future: reduction."

The German economic department also stated that the drivers of economic growth next year are expected to come from five areas:

1. Household consumption, which may increase due to wage agreements that have raised wages, increasing residents' purchasing power;

2. A decrease in inflation;

3. Tax relief measures;

4. An increase in government investments;

5. A recovery in exports, driven by a global economic upturn.Lower interest rates stimulate spending;

Germany's exports are expected to rebound, and with more favorable financing conditions, investment in machinery, equipment, and vehicles may increase.

In recent months, a series of negative news has intensified market concerns about a recession in the German economy—Volkswagen threatens to close factories in Germany, Intel delays the construction of a €30 billion semiconductor facility in Germany... The weakness of Germany, the largest economy in Europe, is dragging down the entire eurozone, and the recovery momentum of the eurozone earlier is weakening.