In 2024, Germany’s economy is projected to stagnate, despite a stronger-than-expected start to the year. The German economic institute IW reports that manufacturing and the construction sector are in recession, with consumption being the only bright spot as it increases with easing inflation. However, this is not enough to spark a real upswing, as investments continue to lag behind due to geopolitical tensions and high interest rates.
Last year, Germany contracted by 0.2%, making it the weakest performance among big euro zone economies. IW predicts zero growth for Europe’s largest economy this year while France, Italy, Britain and the United States are all expected to see expansion. Despite narrowly avoiding a recession at the beginning of the year with a 0.2% growth in the first quarter, Germany’s future remains uncertain.
Foreign trade is expected to remain weak and offer little economic stimulus while Germany’s unemployment rate is projected to rise to 6% on average for the year, up from 5.7% in 2023. With a record number of 46 million employed people on average in 2024, Germany’s economic weakness is becoming more noticeable on its labor market. IW economist Michael Groemling emphasizes that policies need to be put in place in order to improve business conditions and unlock Germany’s potential for growth.