Germany's economy contracted in the final quarter of 2024, raising concerns about a possible winter recession. Despite increases in household and government spending, exports declined significantly, leading to a 0.2% quarter-on-quarter drop in GDP. Experts warn of potential spillover effects to other sectors and highlight the need for structural reforms to address the country's economic challenges.
The German economy contracted in the fourth quarter of 2024, following a slight increase in the previous quarter. Destatis, Germany's statistics office, reported a 0.2% quarter-on-quarter decline in GDP during the three months ending December. Despite rises in household and government consumption, exports fell significantly compared to the previous quarter.
This contraction marks the end of 2024 in negative territory for the German economy, which has faced economic and structural challenges throughout the year. Carsten Brzeski, global head of macro at ING, stated that there is a high likelihood this downturn will lead to a winter recession. Germany's economic woes appear to be concentrated in its industrial sector, but Brzeski warned of potential spillovers to other sectors due to sentiment and real economic channels.The crucial industrial sector is not expected to experience a substantial recovery, as inventory and order book issues persist and tariffs on exports to the U.S. loom. The fourth-quarter figures contrast with a 0.1% GDP growth observed in the third quarter of 2023. Germany's economic performance has been sluggish for the past two years, with quarterly GDP readings mostly remaining near zero. However, the country has managed to avoid a technical recession. Despite this, the outlook remains uncertain. The German government has slashed its growth forecast for 2024 to 0.3%, a significant downward revision from the previous estimate of 1.1%. Robert Habeck, Germany's economy and climate minister, described the situation as 'serious,' emphasizing the economy's long-standing stagnation. He attributed this to internal and global political uncertainty, as well as the outgoing government's inability to fully implement its growth plans due to the early end of its term. Germany is scheduled to hold a federal election on February 23, earlier than initially planned due to the dissolution of the ruling coalition late last year. The new government will face the daunting task of addressing the structural weaknesses of the German economy and steering it towards a path of sustainable growth
German Economy Recession GDP Exports Industry Structural Reforms
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