Germany’s economy contracted for the second year in a row in 2024, signaling ongoing economic struggles, according to data released by the Federal Statistics Office on Wednesday.
The country’s gross domestic product (GDP) shrank by 0.2% in 2024, following a 0.3% decline in 2023. The data, adjusted for price effects, revealed that the overall economy saw a 0.2% contraction after considering calendar effects.
Ruth Brand, a representative of the Federal Statistical Office, noted at a press conference in Berlin that both cyclical and structural challenges hindered better economic performance. These factors included rising competition for German exports, high energy costs, persistent high interest rates, and an uncertain economic outlook.
Manufacturing and Construction Face Significant Declines
The manufacturing sector, a key pillar of the German economy, saw a marked downturn in 2024. Adjusted for price effects, manufacturing output dropped by 3%, with sectors like machinery and equipment production and the automotive industry bearing the brunt. Additionally, energy-intensive industries, including chemicals and metalworking, continued to struggle, impacted by the ongoing energy crisis that began in 2023.
The construction sector also experienced a sharp decline in 2024. Gross value added in the industry fell by 3.8%, as high construction prices and interest rates led to fewer residential buildings being constructed. Despite this, civil engineering saw some growth, with increased activity in road, railway, and pipeline construction projects.
Service Sector Shows Modest Growth
In contrast, the service sector reported overall growth of 0.8%. However, performance varied across sub-sectors. The trade, transport, accommodation, and food services sectors saw stagnation, with mixed results. Retail and transport services reported growth, while motor vehicle trade, wholesaling, and food services experienced declines.
The information and communication sector, however, continued to thrive, growing by 2.5%. Public services, including education, healthcare, and public administration, also showed steady growth, contributing to the overall positive trend in the services sector.
Economic Outlook and Political Implications
The latest figures come at a critical time, just weeks before Germany faces a snap election. Economic challenges, including stagnating growth, fiscal uncertainty, and geopolitical risks, are expected to be major topics of discussion. High energy costs and a weakened automotive sector are adding to the country’s economic woes.
Experts warn that without structural reforms to unlock investments and enhance competitiveness, Germany, Europe’s largest economy, risks prolonged economic stagnation.
