Germany’s economic growth is predicted to remain flat in 2024, falling behind other European countries despite a positive start to the year. The German economic institute, IW, reports that manufacturing and construction are still in recession, with consumption being the only bright spot as it increases with decreasing inflation. However, this is not enough to spark a significant recovery, as investments continue to lag due to geopolitical tensions and high interest rates.
In 2023, Germany’s economy contracted by 0.2%, making it the weakest among big euro zone economies. IW predicts no growth for Europe’s largest economy in 2024 while France, Italy, Britain, and the United States are all expected to see expansion. Despite Germany narrowly avoiding a recession at the beginning of the year with a 0.2% growth in the first quarter, uncertainty remains about the outlook for the rest of the year.
Foreign trade is expected to remain weak and offer little economic stimulus while Germany’s unemployment rate is projected to rise to 6% on average for the year, up from 5.7% in 2023. With an average of 46 million employed people in 2024, the impact of economic weakness on Germany’s labor market is becoming more noticeable. IW economist Michael Groemling stresses the need for policy interventions to improve business conditions and unlock Germany’s potential for growth.
