According to Bloomberg, Germany’s GDP is expected to shrink by 0.2% in 2024. At the same time, analysts believe that Europe’s largest economy has substantial room for growth, underscoring the need for immediate action to unlock its potential. 

The German government has downgraded its economic growth forecast, now projecting a 0.2% contraction in GDP this year. This will be followed by a 0.3% decline in 2023. However, there is hope on the horizon: the outlook for next year is more optimistic, with Germany’s economy expected to recover. Predictions suggest that GDP will grow by 1.1% in 2025 and by 1.6% in 2026.

German Economy Minister Robert Habeck has pointed to several structural problems that need to be addressed, particularly energy security, excessive bureaucracy, and a shortage of skilled labor. Adding to the challenges is ongoing geopolitical uncertainty. "Germany and Europe are caught in the middle of crises between China and the United States and must learn to assert themselves," Habeck said.

One of the hardest-hit sectors is the automotive industry, which is a cornerstone of the country’s economy. Thus, Volkswagen AG has announced plans to close some of its factories, while Intel Corp. has postponed the construction of a semiconductor facility. Germany may already be in a technical recession, according to some economists.

Data from Destatis, the federal statistics office, shows that German manufacturing orders plummeted by a staggering 5.8% in August, marking the steepest monthly drop since the start of 2024.

Earlier, Bundesbank President Joachim Nagel admitted that his optimism about the German economy was premature. He now predicts another downturn by the end of 2024, a scenario that could unfold if Republican presidential candidate Donald Trump wins the US election.