Caricatures and drawings on Forex portal
German economy shrinks for 2nd consecutive year
The German economy is facing an uphill battle, grappling with a persistent decline that has now lasted for two consecutive years, an unprecedented scenario for Europe's largest economy.
Germany's economy took a significant hit in 2024, shrinking by 0.1% in the final quarter of the year. The full-year contraction reached 0.2%, marking a troubling trend for the country's economic performance. Once the driving force behind EU growth, Germany is now the weakest link in the eurozone, sparking growing concerns and underscoring the urgent need for decisive action.
The federal statistics office attributed the downturn to several key factors, including a noticeable decline in global demand and intensified competition from China. Thus, German exports fell by 0.8% in 2024 compared to the previous year.
According to Germany’s economy ministry, the country risks entering a technical recession if the first quarter of 2025 shows negative growth. Notably, a technical recession is defined as two consecutive quarters of decline in a country's gross domestic product.
A tangible economic recovery is possible, provided there is clarity on financial and geopolitical developments, the ministry said. The global trade outlook remains a focal point, but the current prospects for German trade are far from promising, the report noted.
Looking ahead, the economy ministry expects factors contributing to lower inflation in Germany to prevail in 2025. These include moderate price dynamics for key goods, the effects of restrictive monetary policy, and lower wages.
© InstaFintech Group
