Germany’s economy shrinks in ’24

Germany’s economy contracted in 2024 compared to the previous year with the gross domestic product (GDP) dropping by 0.2 per cent, according to preliminary figures from the Federal Statistical Office (Destatis).

The downturn was due to structural and cyclical pressures such as high energy costs, elevated interest rates, and increasing global competition for German exports, according to German economist Ruth Brand.

Manufacturing was hit hardest, with gross value added falling by 3.0 per cent, driven by steep declines in machinery, automotive, and energy-intensive industries. The construction sector also saw a 3.8 per cent contraction, as high costs and interest rates reduced residential building activity.

Despite these challenges, the service sector grew by 0.8 per cent, buoyed by gains in information, communication and public services. Household consumption rose modestly by 0.3 per cent, while government spending increased by 2.6 per cent, supported by higher social benefits.

Foreign trade also faced headwinds, with exports declining by 0.8 per cent while imports edged up by 0.2 per cent. On the labour front, employment reached a record 46.1 million, although growth slowed significantly by year-end.

Germany’s government deficit ratio remained steady at 2.6 per cent of GDP, below the EU’s 3 per cent threshold.

Attribution: Amwal Al Ghad English

Subediting: M. S. Salama