The export-oriented economy also faces mounting challenges as trade surplus narrowed in 2024.
BERLIN, Jan. 15 (Xinhua) -- Germany's economy shrank for the second year in a row in 2024, heightening concerns about the recovery prospects of Europe's largest economy amid persistent struggles.
Price-adjusted gross domestic product (GDP) for Germany declined by 0.2 percent, according to a report released by the Federal Statistical Office on Wednesday. This follows a 0.3-percent contraction in 2023, marking Germany's first consecutive years of negative growth since the early 2000s.
"Cyclical and structural pressures stood in the way of economic development in 2024," said Ruth Brand, president of the statistics office, during a press conference. She highlighted high energy costs, economic uncertainties, and intensifying global competition as major factors hampering growth.
Industrial output was particularly hard-hit, shrinking by 3 percent year-on-year, driven by declines in the machinery and automotive sectors. This follows a 2-percent contraction in 2023. In contrast, the services sector maintained growth, expanding by 0.8 percent in 2024. These trends may raise concerns for the industrial powerhouse.
Private consumption, a cornerstone of Germany's recovery efforts, grew by a mere 0.3 percent in 2024, providing limited support to the broader economy.
The export-oriented economy also faces mounting challenges as trade surplus narrowed in 2024. According to the figures, exports dropped by 0.8 percent, led by declines in the electrical equipment, machinery and automobile industries, while imports edged up by 0.2 percent.
Carsten Brzeski, global head of macro at ING Research, expressed a pessimistic outlook for Germany's substantial recovery, citing the continued weakness in the manufacturing sector.
Brzeski warned of potential risks tied to restrictive trade policies from U.S. President-elect Donald Trump, like punitive tariffs. Such measures could further weigh on German exports and compel companies to shift production to the U.S., exacerbating challenges for investment and growth, he added. ■