Germany’s economy is projected to face stagnation in 2024, despite a strong start to the year, according to the latest forecasts from the German economic institute IW. The manufacturing and construction sectors are still struggling, with consumption being the only bright spot as it picks up due to easing inflation. However, this alone is not enough for a real upswing, and investments need to increase to drive growth.
Investment is currently depressed due to geopolitical tensions and high interest rates, making financing more expensive. Last year, Germany’s economy shrank by 0.2%, the weakest performance among major euro zone economies. IW predicts 0% growth for Europe’s largest economy this year, falling behind countries like France, Italy, Britain, and the United States.
Despite narrowly avoiding a recession at the start of the year, Germany’s economy is still facing challenges. The country’s unemployment rate is expected to increase to 6% on average in 2024, up from 5.7% in 2023. The effects of the economic weakness are becoming more visible on the labour market in Germany.
To improve conditions for businesses and drive growth, a policy boost is needed, according to IW economist Michael Groemling. Without changes, Germany risks squandering its potential and failing to capitalize on opportunities for growth. Foreign trade is also expected to remain weak, providing little economic stimulus this year. Overall, Germany’s economic outlook for 2024 remains uncertain