The German economy is projected to remain stagnant in 2024, despite a strong start to the year. According to the German economic institute IW, the manufacturing and construction sectors are still in recession, with consumption being the only bright spot as it increases with easing inflation. However, this is not enough to spark a real upswing, as investments continue to lag behind due to geopolitical tensions and high interest rates.
Last year, Germany’s economy contracted by 0.2%, making it the weakest among big euro zone economies, due to factors such as high energy costs and lacklustre global orders. IW predicts that Europe’s largest economy will see no growth this year, while other countries like France, Italy, Britain and the United States are expected to experience expansion. Despite narrowly avoiding a recession at the beginning of the year with a 0.2% growth in the first quarter, Germany’s outlook remains uncertain.
Foreign trade is expected to remain weak and offer little economic stimulus for Germany’s economy. Additionally, unemployment rate in Germany is projected to rise on average by 0.3% from 5.7% last year reaching 6%. With an average of 46 million employed people in 2024, the impact of economic weakness on Germany’s labor market becomes more noticeable. IW economist Michael Groemling emphasizes the need for a policy boost in order to improve business conditions and unlock Germany’s potential for growth.