In 2024, Germany’s economy is expected to stagnate, despite a stronger start to the year. The manufacturing and construction sectors remain in recession, and consumption is predicted to increase as inflation eases. However, this may not be enough for a true upswing in the economy. Investments are hindered by the geopolitical situation and high interest rates, which make financing more expensive.
In 2023, Germany’s economy experienced a 0.2% contraction, the weakest performance among major euro zone economies. This year, the IW forecasts zero growth for Germany, while other countries like France, Italy, Britain, and the United States are expected to expand. Although Germany saw growth of 0.2% in the first quarter of 2024, the previous quarter had seen a 0.5% shrink.
Foreign trade is not expected to provide much economic stimulus, and the unemployment rate in Germany is projected to increase to 6% on average for the year. Despite a record number of 46 million employed people on average in 2024, the effects of economic weakness are becoming more evident on the labor market. There is a need for policy measures to improve business conditions and unleash the full potential of the German economy.