German economy to shrink further in 2024, think-tanks issue statement

Output in Europe’s largest economy will decline by 0.1% this year, five think tanks said. It shrank by 0.3% in 2023.
| Photo Credit: FABIAN BIMMER

Germany’s economy is expected to shrink slightly in 2024, leading economic institutes said on Thursday, as the traditional manufacturing powerhouse continues to stagnate.

Output in Europe’s largest economy will decline by 0.1% this year, five think tanks said in a joint statement, after it shrank by 0.3% in 2023.

The new figure was a small but significant downgrade on the institutes’ previous estimate of 0.1% GDP growth for 2024, made earlier this year.

“The German economy has been stagnating for more than two years,” the institutes – DIW, Ifo, IfW Kiel, IWH and RWI, said in the joint statement.

“A slow recovery is likely to set in next year, but economic growth will not return to its pre-coronavirus trend for the foreseeable future,” they said.

The institutes’ forecast growth to reach 0.8% in 2025, a downward revision on their earlier estimate of 1.4%.

For 2026, they predicted the German economy to expand by 1.3%.

Germany, traditionally a driver of European growth, was the only major advanced economy to shrink in 2023 as it battled high inflation, an industrial slowdown and cooling export demand.

While inflation has slowly slowed in 2024, a hoped-for recovery has failed to materialise between a continued industrial slowdown and weak demand in key market – China.

Recently, the economy under-performed analyst expectations in the second quarter, shrinking by 0.1%.
Factors weighing on the economy “will only gradually disappear”, DIW’s head of forecasting Geraldine Dany-Knedlik said.