Germany to Grow by Just 0.3 Percent in 2024: Industry Group

Farmers, truckers, and supporters from Germany stage protests in the capital city of Berlin on Jan. 15, 2024. (Stefan Frank/Middle East Images via AFP/Getty Images)

Germany will register only marginal growth in 2024, an industry group predicted as the country’s annual gross domestic product (GDP) declined last year for the first time since 2020.

The Federation of German Industries (BDI) expects the country’s economy to grow by 0.3 percent in 2024, while the global economy registers a 2.9 percent growth rate, according to a Jan. 16 statement. Germany is the largest economy in Europe.

“The economy in Germany is at a standstill. Compared to most other large industrialized countries, our country is falling further behind,” BDI President Siegfried Russwurm said in Berlin on Jan. 16. “We don’t see any chance of a quick liberation in 2024.”

Mr. Russwurm’s comments come as Destatis, Germany’s federal statistics office, revealed on Jan. 15 that the country’s GDP shrank by 0.3 percent in 2023.

“Overall economic development faltered in Germany in 2023 in an environment that continues to be marked by multiple crises,” Destatis President Ruth Brand said at a news conference in Berlin.

“Despite recent price declines, prices remained high at all stages in the economic process and put a damper on economic growth. Unfavorable financing conditions due to rising interest rates and weaker domestic and foreign demand also took their toll.”

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As such, the German economy was unable to continue its recovery from the “sharp economic slump” it saw during the pandemic year of 2020.

The 0.3 percent GDP dip was the first decline since 2020 and is only the second annual decrease in growth rate between 2012 and 2023.

Carsten Brzeski, global head of macro research at the Dutch bank ING, told The Guardian that there’s “no imminent rebound in sight” for the German economy. The country “looks set to go through the first two-year recession since the early 2000s.”

“We expect the current state of stagnation and shallow recession to continue. In fact, the risk that 2024 will be another year of recession is high,” he said.

In October, the International Monetary Fund (IMF) predicted Germany to be the worst GDP performer among advanced economies in 2023. Although the agency projected all advanced economies to register positive growth last year, Germany was the exception, as the IMF predicted a 0.5 percent decline.

Mr. Russwurm pointed out that Germany’s minimal growth is driven by private consumption, which is stimulated by a decline in inflation and a strengthening of purchasing power. Several economic factors are “even more difficult” this year than in 2023, BDI said.

Although there has been progress in bringing down inflation rates, which paves the way for gradual interest rate cuts, such events will have noticeable effects on the real economy only from spring 2025, the BDI president stated.

Germany’s Economic Issues

Speaking about the political aspects affecting the German economy, Mr. Russwurm said that politicians in the country have made things too complicated, negatively affecting trust and creating uncertainty among businesses and citizens. He called on all democratic parties to come together to make decisions the country urgently requires.

Germany has been rocked by strikes from train drivers and farmers in recent weeks.

While demands over pay and working hours triggered the train employees, farmers are striking because of government policies that negatively affect them, including scaling down agricultural subsidies and ending green tax exemptions for farming vehicles. The country’s farming community insists that such measures threaten their survival.

The BDI president cited the building of hydrogen backup power plants for energy transition as a key issue requiring urgent action. As long as their construction remains in limbo because of issues with business models and financing, Germany will remain dependent on coal-power plants, Mr. Russwurm stated.

“This exact scenario is getting closer every day.” Such a situation would be embarrassing for Germany, which has an ambitious decarbonization plan, he said.

Last month, Berlin decided it would cut down funding aimed at the green transformation of Germany and slash subsidies for solar power projects and traditional energy in a bid to solve a 17 billion euro (about $18.3 billion) hole in the country’s budget.

Mr. Russwurm also criticized the European Supply Chain Due Diligence Act and the AI Act. The EU Due Diligence Act seeks to hold corporations accountable for their environmental and social effects. The AI Act lays down regulations for artificial intelligence systems in the European Union.

“We need an internal market that, because of its economies of scale, also allows future-oriented industrial value creation to be scaled up, not just in digitalization, but in general,” he said.

Mr. Russwurm said the various elections in Europe—such as state elections in Brandenburg, Saxony, and Thuringia—and the U.S. presidential election this year are “extremely important” to the country.

In June last year, Mr. Russwurm warned that German industries might move out of the country because of unfavorable business conditions. “A feeling of impatience and uncertainty is spreading among many entrepreneurs,” he said during an event.

“More and more German companies, including small and medium-sized enterprises, are considering shifting parts of their value creation out of Germany because domestic costs, speed, and bureaucracy are simply not acceptable for them in comparison.”