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German economy continues to shrink

The EU's economic engine, the German economy, contracted for the second year in a row in 2024, according to the country's statistics agency Destatis. And no major recovery for the export-dependent economy is expected to come in 2025.

» Published: 15 January 2025

German economy continues to shrink
Photo: Michael Probst AP/TT

It is primarily the heavy German export industry that is facing headwinds and is pulling down growth to minus.

The decrease in Germany's gross national product (GNP) in 2024 was 0.2 percent, which follows the decrease of 0.3 percent in 2023.

This is the first time since the 1950s that the – then West German – economy is shrinking for two years in a row.

During the fourth quarter of 2024, the economy shrank by 0.1 percent compared to the previous quarter.

The economic headwind – which is also hitting hard on German giant companies like Volkswagen (VW) – was a decisive reason for the three-party coalition, with Social Democrat Olaf Scholz as Chancellor, to break apart in November. A new election is to be held in February.

That Destatis is reporting a GNP decrease in 2024 was expected.

The German central bank, Bundesbank, part of the European Central Bank (ECB), is counting on a GNP increase of 0.2 percent. But Bundesbank has warned that even 2025 may end on minus for the German economy if the US's incoming President Donald Trump follows through on his threats of tariffs.

The ECB lowered the interest rate four times last year and is expected to continue lowering the rate this year.

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By TTThis article has been altered and translated by Sweden Herald

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