German Economy Expected to Contract Again in 2024

• Germany's economy is expected to contract by 0.2% in 2024, the economy ministry said on Wednesday, which is likely to make it for the second year running the only member of the Group of Seven major industrial democracies to post shrinking output.
• The government is cutting its forecast from a previous projection of 0.3% growth for this year, as the expected recovery in the second half of the year failed to materialise. Germany's economy was already the weakest among its large euro zone peers and other G7 countries last year, with a 0.3% decline in gross domestic product.
• The economy contracted in the second quarter, sparking fears of a possible recession, defined as two consecutive quarters of contraction. Early indicators such as industrial production and business climate suggest that the economic downturn has continued into the second half of the year, the ministry said.
• The economy has not grown strongly since 2018 due to its structural problems and geopolitical challenges, Habeck said. The strength of the German economic model was based on two pillars: cheap energy for industry from Russia and functioning global markets for its exports, the economy minister said.
• To counter the cyclical and structural challenges, it has agreed to a growth package of 49 measures. "If they are implemented, the economy will be stronger and more people will come back to work," Habeck said.
• Growth is expected to resume in 2025 due mainly to increased private consumption resulting from higher wages, falling inflation and tax relief, the ministry said. Lower interest rates should also stimulate consumption, it said. However, construction investments will not contribute to growth again until 2026, the ministry said.

(Source: Reuters)