BERLIN, Jan 15 (Reuters) - Germany's economy shrank by 0.2% in 2024, marking the second consecutive year of contraction as the country faces challenges amidst a downturn impacting Europe's largest economy. Ruth Brand, president of the Federal Statistics Office, highlighted that various factors hindered economic growth, including increased foreign competition, high energy costs, elevated interest rates, and uncertain prospects. Reflecting on these difficulties, Brand stated that Germany is experiencing an extended period of stagnation not seen since the post-war era.
Amidst declining global demand and fierce competition, particularly from China, Germany's export-focused economy faced a 0.8% decrease in exports in 2024. Analysts expressed concerns about the economy's trajectory, with some anticipating a third consecutive year of recession in 2025. However, there were modest positive signs, such as a 0.3% rise in consumer spending and a stable budget deficit of 2.6% of GDP in 2024.
Despite hopes for an economic upturn, challenges persist, with the European Central Bank expected to further reduce interest rates. The need for a substantial shift in economic policy after the upcoming federal elections was emphasized to facilitate a genuine economic recovery. Additionally, cautionary notes underscored the need for clarity on economic, financial, and geopolitical fronts, as well as concerns about industrial production and trade outlooks.