According to preliminary data published on Wednesday, the shrank by 0.2% in 2024.
This is the second year in a row that Germany has reported a contraction in GDP, according to the Federal Statistical Office, Destatis. In 2023, Europe’s biggest economy contracted by 0.3%.
The publication of the figures comes weeks before Germans head to the polls to elect a new government.
Why is the German economy suffering?
Early fourth-quarter data showed that the economy had also reduced by 0.1% compared to .
Germany has been struggling with a cost of living crisis over the past several years, partially to do with skyrocketing energy prices brought on by the Russian invasion of Ukraine.
Formerly a major customer for cheap Russian gas, Germany has had to scramble to find other energy suppliers. The war, as well as climate change and other international supply chain factors have also contributed to rising inflation and higher costs of essentials like groceries and hygiene articles.
While inflation has become a global phenomenon, it hit Germany particularly hard due to the country’s relatively low grocery prices in years prior.
German exports take a hit
Traditionally an export-heavy economy, decreased demand for German products has also played a role. For example, Chinese-made vehicles, particularly electric ones, example, have made a dent in demand for .
Germany is also struggling to balance its historical devotion to a balanced budget with aging infrastructure and lagging competitiveness in industry and technology.
Indeed, a row about — a mechanism that controls how much debt the government is allowed to take on — led to the collapse of Chancellor Olaf Scholz’s coalition government in November, triggering .
The collapse occurred when Scholz asked for Finance Minister Christian Lindner to resign. Linder and his business-friendly Free Democrats (FDP), though the most junior member of the coalition, refused to budge on changing the debt brake to allow for more borrowing and spending. The FDP then .
es/ab (dpa, Reuters, AFP)
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