Germany Enters Recession: GDP Shrinks Again in 2024, Marking a Historic Crisis

Germany Faces Recession in 2024

The official announcement has finally come: today, the Berlin government disclosed that Germany will enter recession in 2024, marking a contraction for the second consecutive year.
The German GDP is projected to decline by 0.2% this year, following a negative growth rate of -0.3% in 2023.

This downgrade of the previously anticipated outlook, much feared and whispered over the past few days, has been confirmed.
Berlin was compelled to revise down its forecasts announced back in April, when it had predicted a GDP expansion of +0.3% for 2024.

Future Projections

The forecasts for the German GDP for 2025 and 2026 were also revealed today, indicating growth rates of +1.1% and +1.6%, respectively.
Robert Habeck, the Vice Chancellor and Minister of Economy, commented on the new outlook, emphasizing that Germany has not experienced solid GDP growth since 2018.
The reasons for this stagnation, as explained by the minister, are the nation’s structural issues compounded by global economic challenges.

Habeck stressed that amidst crises erupting worldwide, “Germany and Europe are being squeezed between China and the United States, and must learn to assert themselves.” This appeal echoes a call made earlier in September by former ECB President Mario Draghi during the presentation of an anticipated competitiveness report commissioned by EU Commission President Ursula von der Leyen.

Historical Context

Martin Wansleben, head of the German Chamber of Industry and Commerce, also weighed in on the government’s new GDP predictions.
He noted that Germany has only faced two consecutive years of recession once before, in 2002 and 2003, adding that the current GDP only exceeds pre-COVID-19 levels by about half a percentage point.

“There has never been such a prolonged phase of weakness for the German economy,” Wansleben noted.
It is essential to highlight that, according to forecasts from the International Monetary Fund (IMF), if the predictions made by Olaf Scholz’s government materialize and the German GDP continues to decline, Germany would stand out as the only G7 country facing a contracting GDP.

Government Response

To restore economic growth, the Berlin government has initiated a 49-measure package that, as Minister Habeck stated, “if implemented, would strengthen the economy and increase employment.” However, this plan still requires approval from both houses of Parliament, which are expected to vote on it by the end of the year.