Data reveals Germany on its way to longest post-war recession

(MENAFN) Germany’s Economy contracted for a second consecutive year in 2024, marking the first time in over 20 years that the country has experienced two years of economic decline. According to the country’s federal statistics office, Destatis, the GDP fell by 0.2% in 2024, following a 0.3% drop in 2023. This downturn has been attributed to a combination of cyclical and structural factors, with high energy costs and a shift from affordable Russian gas to pricier liquefied natural gas (LNG) from the U.S. significantly impacting the manufacturing sector.

Destatis president Ruth Brand noted that these economic pressures include heightened competition in key export markets, the high cost of energy, persistent inflation, and an uncertain economic outlook. Exports, a crucial component of the German economy, declined by 0.8%, while industrial output remained stagnant due to rising production costs. Household spending also fell by 1.5% as inflation reduced purchasing power, and the construction sector shrank by 3.8% due to higher raw material costs and interest rates.

Rising costs have resulted in shutdowns and bankruptcies across various industries, including major companies like Volkswagen. Notably, Germany was the only economy in the Group of Seven (G7) to contract in 2023. The Handelsblatt Research Institute (HRI) warned that the country is on track for its longest post-war recession, predicting a third consecutive year of contraction in 2025. This prolonged downturn surpasses the two-year recession of the early 2000s and is being exacerbated by the energy crisis, inflation, and the lingering effects of the Covid-19 pandemic. Meanwhile, as Germany heads to the polls for snap elections on February 23, the political landscape remains unstable after Chancellor Olaf Scholz’s coalition government collapsed in November.

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