Germany’s economy, Europe’s largest, contracted for the second straight year in 2024, according to data released by the Federal Statistics Office on Wednesday.
The economy shrank by 0.2% in 2024, following a 0.3% decline in 2023. Destatis, the Federal Statistical Office, noted in a press release: “The price-adjusted gross domestic product (GDP) was 0.2% lower in 2024 compared to the previous year.”
At a Berlin press conference, Ruth Brand highlighted the economic pressures Germany faced in 2024. “Structural and cyclical factors, such as high energy costs, stiff competition in export markets, elevated interest rates, and an uncertain outlook, hindered economic performance,” she said.
Manufacturing and Construction Struggle
Germany’s gross value added for the entire economy dropped by 0.4% in 2024 after adjusting for price effects, with key sectors suffering disproportionately.
“Manufacturing output declined significantly, with gross value added falling 3.0% compared to 2023,” Destatis stated. Sectors like machinery and automotive production were particularly hard-hit. Energy-intensive industries, such as chemicals and metalworking, also continued to struggle, maintaining the low production levels seen in 2023.
The construction industry faced even steeper declines, with gross value added contracting by 3.8% in 2024. High construction costs and elevated interest rates discouraged new residential projects. “Building completion work saw reduced output, but civil engineering projects like roads and pipelines grew slightly,” Destatis noted.
On the other hand, the service sector managed modest growth (+0.8%) overall, though performance varied by sub-sector. Retail and transport services expanded, while wholesale trade, motor vehicle sales, and food services reported declines. Business services stagnated, but the information and communication sector grew by 2.5%. Public sector-related areas, including health, education, and administration, saw a 1.6% increase in gross value added.
Economic Challenges Loom Ahead of Snap Election
The data comes as Germany approaches a pivotal snap election, with economic recovery as a central campaign issue.
Stagnant growth, high energy costs, fiscal uncertainty, geopolitical risks, and struggles in the automotive sector underscore the country’s economic challenges. Without reforms to boost competitiveness and attract structural investments, analysts warn Germany risks prolonged economic stagnation.
As Europe’s leading economy, Germany’s success is vital for the region’s stability, making the upcoming election crucial for determining its economic future.