GDP contracted by 0.2% in 2024 due to soaring energy costs and weak exports, official figures show
The German economy contracted for a second straight year in 2024 for the first time in more than two decades, according to a report by the country’s federal statistics office Destatis, issued on Wednesday.
Official figures showed that gross domestic product fell by 0.2% last year after dropping by 0.3% in 2023.
The Eurozone’s largest economy has been falling behind its peers in recent years, largely due to a prolonged manufacturing downturn. The country’s shift from affordable Russian gas to more expensive liquefied natural gas (LNG) from the US has driven up energy costs, severely affecting manufacturers and small businesses.
The downturn was caused by “cyclical and structural pressures,” according to Destatis president Ruth Brand.
“These include increasing competition for the German export industry on key sales markets, high energy costs, an interest rate level that remains high, and an uncertain economic outlook,” she stated.
Exports, which form the backbone of the German economy, saw a 0.8% decline in 2024, according to the report. Industrial output also stagnated, reflecting the struggle to compete globally as production costs rose.
Household spending, another key driver of the economy, declined by 1.5%, due to persistently high inflation and reduced purchasing power. The construction industry shrank sharply by 3.8% as higher prices for raw materials and elevated interest rates weighed on building.
Rising costs have led to shutdowns and bankruptcies across industries, including major players like Volkswagen. Germany was the only Group of Seven economy to contract in 2023.
This month, Handelsblatt Research Institute (HRI) warned that the German economy is on course for its longest post-war recession, with a third consecutive year of contraction projected for 2025. This economic slump surpasses the two-year downturn of the early 2000s and reflects the compounded effects of an energy crisis, persistent inflation, and the Covid-19 pandemic, according to the HRI.
The latest Destatis report comes as Germans are head to the poll stations next month, following the collapse of Chancellor Olaf Scholz’s coalition government in November over disagreements regarding Ukraine aid and economic policies. The chancellor lost a confidence vote in December, leading to the dissolution of parliament and the scheduling of snap elections to take place on February 23.
