The German economic system continues to face difficulties, and the dynamic of growth is not a reality for it, as evidenced by the fact that in the fourth quarter of 2024, the gross domestic product (GDP) of this country decreased by 0.2% compared to the previous three-month period of last year.
It is worth noting that Germany’s economy is one of the largest in the European Union. For this reason, the condition of this system has a kind of cascading effect on the entire mentioned region.
The decline in German GDP in the fourth quarter of 2024 is evidenced by preliminary data published by the country’s statistics office Destatis on Thursday, January 30. It is worth noting that this data is adjusted by price, calendar, and seasonal variations.
Analysts interviewed by the media predicted that Germany’s GDP would decline by 0.1% in the fourth quarter of 2024.
Destatis’ data shows that household and government consumption expenditures in the mentioned country increased from October to December last year. At the same time, German exports for the specified period showed a significant decrease compared to the figures recorded for the third quarter of 2024.
Destatis noted that the economy of the mentioned country ended last year within negative territory. Also in this context, it was underlined that Berlin faced economic and structural problems in 2024.
Carsten Brzeski, global head of macro at ING, said it is highly likely that the current downturn observed in the German economy will lead to a winter recession.
The problems facing Berlin are concentrated in the industrial sector. At the same time, this may change. The corresponding opinion is held by Carsten Brzeski. According to the expert, given the importance of industry for the entire economy, spillovers through sentiment or real economic channels are already occurring.
Carsten Brzeski stated that the crucial industry is also not set for a substantial recovery as issues with inventories and order books persist and tariffs on exports to the US loom.
In the third quarter of 2024, Germany’s GDP showed growth of 0.1%. For a long period, the economic performance of the country has been sluggish. Germany’s quarterly GDP figures were mostly hovering around the flatline. The corresponding situation has been typical for the last two years. At the same time, the German economic system managed to avoid the scenario of a technical recession.
In 2024, the GDP of the mentioned country fell by 0.2% year-on-year. The previous year was also not positive for the German economy. In 2023, the country’s GDP showed a decrease of 0.3%.
Currently, 2025 is expected to be a more positive period for the German economic system. Last Wednesday, January 29, the government of the country published the forecast of the dynamic of GDP. The mentioned projection provides that the specified indicator will grow by 0.3% in the current year. So far, it is impossible to give an unambiguous answer to the question of whether these expectations will become a fact of objective reality in the space of the German economic system. It is also worth paying special attention to the fact that the forecast regarding the dynamic of Germany’s GDP has worsened. The previous estimate provided for a 1.1% increase in the mentioned indicator.
Robert Habeck, Germany’s economy and climate minister, said during a press conference Wednesday that the diagnosis is serious. This formulation is a characterization of the current state of affairs in the country’s economic system.
Robert Habeck stated that the German economy has been in the condition of stagnation for a long time. Speaking about the factors impacting the decline in expectations regarding the country’s GDP, he mentioned domestic and global political uncertainty. Robert Habeck also stated that the outgoing German government was unable to fully implement its plans for economic growth, as its term was ending early.
Federal elections in Germany are scheduled for February 23. These elections will be held earlier than originally planned due to the break up of the country’s ruling coalition last year.
Robert Habeck also stated that structural problems are a factor impacting the German economic system. In this case, the comment of the country’s finance minister Jörg Kukies was actually repeated.
Jörg Kukies stated that the structural weaknesses of Germany’s economic system absolutely have to be addressed. In the relevant context, it was noted that it is really important that Berlin embarks on a path of economic growth.
The recession scenario will be realized in the German economic system if the country’s GDP again shows a negative dynamic in the first quarter of 2025.
Commerzbank chief economist Joerg Kraemer stated that for the first quarter of the current year leading indicators such as the Ifo business climate or incoming orders do not yet signal any improvement. It was also noted that from the spring onwards, an anaemic upward tendency is on the cards at best.
Andrew Kenningham, chief Europe economist at Capital Economics stressed that the German economy has not grown for the last five years. The expert also noted that structural stagnation in the country will drag on for some time, despite the likely easing of fiscal policy after the elections.
As we have reported earlier, US Economy Slows.
