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Germany's economy shrank in 2024

The Gross Domestic Product (GDP) of Germany decreased by 0.3% in Q4 of 2024, according to preliminary estimates. However, Germany avoided a technical recession, as the GDP growth for the previous quarter was revised to 0% from an initial estimate of -0.1%.


For the entire year of 2024, the GDP contracted by 0.3%, marking the first year of negative growth since the pandemic and the fifth in this millennium. This weak performance contrasts sharply with Germany's global peers. It was likely the only Group of Seven (G7) economy to shrink in 2023, and the OECD forecasts that its growth will remain sluggish, ranking among the lowest in the G20. The downturn in 2023 was driven by declines in manufacturing, government spending, and private consumption, as reported by the statistics office.


Our Take: Several factors are influencing the German economy, most of which are the result of minimal reform momentum and increasing bureaucratic obstacles in recent years. The ongoing strikes are merely a symptom of this failed economic strategy. There are significant doubts about the current government's ability to reverse this trend. However, early indicators suggest that there may be a turnaround in economic sentiment. Despite the challenges, Germany is down but not out.


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