Germany’s Stagnant Economy: Sluggish Growth, High Unemployment, and Uncertain Outlook in 2024

Despite a stronger-than-expected start to the year, Germany’s economy is forecasted to stagnate in 2024, falling behind its European peers. According to the German economic institute IW, manufacturing and the construction sector are stuck in recession, with consumption being the only bright spot as it increases with easing inflation. However, this is not enough to spark a real upswing, as investments continue to lag behind due to the geopolitical situation and high interest rates.

Last year, the German economy contracted by 0.2%, the weakest performance among big euro zone economies, due to factors such as high energy costs and lacklustre global orders. IW predicts zero growth for Europe’s largest economy this year, 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, the outlook remains uncertain.

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 a record number of 46 million employed people on average in 2024, the impact of economic weakness on the labor market in Germany is becoming more noticeable. IW economist Michael Groemling emphasizes