Germany’s economy shrank by 0.2% in 2024, following a 0.3% contraction in 2023, according to the Federal Statistics Office (Destatis).
“Initial calculations by Destatis show a price-adjusted gross domestic product (GDP) decrease of 0.2% in 2024 compared to the previous year. After calendar adjustments, the economic decline remains at 0.2%,” a press release confirmed.
“Both cyclical and structural challenges hindered better economic performance in 2024,” said Ruth Brand at a press conference in Berlin.
“Key factors included rising competition in export markets, persistently high energy costs, elevated interest rates, and economic uncertainty. These combined pressures caused Germany’s economy to contract again last year,” she explained.
Germany’s Economy: Declines in Manufacturing and Construction
The overall gross value added in the economy dropped by 0.4% in 2024 after price adjustments, with significant sectoral disparities.
“In manufacturing, production fell sharply, with gross value added decreasing by 3.0%. Key sectors like machinery, equipment, and the automotive industry experienced major declines. Energy-intensive industries, such as chemicals and metalworking, also saw low production levels following sharp energy price hikes in 2023,” Destatis reported.
The construction industry faced an even steeper decline, with gross value added dropping 3.8%. High construction costs and elevated interest rates contributed to a reduction in residential building projects.
“Output in building completion work also fell, but infrastructure projects like road, railway, and pipeline construction supported growth in the civil engineering sector,” Destatis added.
By contrast, the service sector showed overall growth of 0.8% in 2024, though performance varied across branches. For example, trade, transport, accommodation, and food services remained stagnant. Retail and transport services grew, while motor vehicle trade, wholesaling, and food services declined.
“The information and communication sector grew by 2.5%, and public sector-linked areas like administration, education, and healthcare also showed steady increases, with gross value added rising by 1.6%,” Destatis noted.
Snap Election Looms Amid Economic Challenges
The economic contraction comes weeks before Germany’s snap election, with fixing the country’s economy dominating the political agenda.
Stagnating growth, fiscal uncertainty, geopolitical tensions, high energy costs, and a weakening automotive sector are compounding the challenges. Without critical reforms to boost structural investments and enhance competitiveness, Europe’s largest economy risks prolonged economic stagnation.