Germany’s economy, despite showing promising signs at the start of 2024, is expected to stagnate this year according to the latest forecasts from the German economic institute IW. The manufacturing and construction sectors are still struggling with consumption being the only bright spot as it picks up due to easing inflation. However, this alone is not enough for a real upswing, and investments need to increase to drive growth.
Investment is currently depressed due to geopolitical tensions and high interest rates, making financing more expensive. Last year, Germany’s economy shrank by 0.2%, marking its weakest performance among major euro zone economies. IW predicts 0% growth for Europe’s largest economy in 2024, falling behind countries like France, Italy, Britain and the United States.
Germany’s unemployment rate is expected to increase to an average of 6% in 2024 from 5.7% in 2023. The economic weakness is becoming increasingly visible on the labor market in Germany. To improve business conditions and drive growth, a policy boost is needed according to IW economist Michael Groemling. Without changes, Germany risks missing out on opportunities for growth and failing to capitalize on its potential. Foreign trade is also expected to remain weak, providing little economic stimulus this year. Overall, Germany’s economic outlook for 2024 remains uncertain with challenges that need to be addressed in order to foster sustainable growth