Amid backlash from its choice to toe the US-driven anti-Russia line and comply with Western sanctions policies, the German economy shrank by 0.2% last year, displaying the weakest performance among large Eurozone economies.
Germany is expected to face stagnation in 2024, despite having shown a marginal upturn at the start of the year, according to a bleak forecast contained in a report by the German Economic Institute (IW), as cited by Reuters.
Once Europe’s industrial powerhouse, Germany will have to get used to its straggler role, lagging behind its European peers, the private industry-sponsored research institute stated.
In particular, the manufacturing and construction sectors remain stuck in recession, according to the IW’s forecasts. While consumption is picking up, “That’s not enough for a real upswing,” IW economist Michael Groemling was cited as saying. He lamented the “huge gaps” in investment that were manifest.
The country may dodge a recession in 2024 on the back of a modest rebound in consumer spending, according to data from the German Federal Statistical Office released earlier this year. However, growth is expected to range from 0.1 to 0.3 percent through the remainder of the year.
Furthermore, Germany is facing a huge outward drain of funds, Friedrich Merz, chairman of Germany’s opposition Christian Democratic Union (CDU) party, told the Tagesspiegel newspaper earlier in May.
As for inflation, it surged more than predicted in April on the back of persistently high energy and food prices, the Federal Statistical Office said. Headline inflation was at 2.2 percent year-on-year – the same as in March.
When the West unleashed its sanctions campaign targeting Russia over Ukraine back in 2022, Moscow warned that the restrictions would backfire. Today nowhere is this more evident than in Germany. The move to reject cheap and reliable Russian pipeline gas in favor of tanker-shipped liquefied natural gas caused manufacturers to flee the country. Along with the fallout from the sabotage of the Nord Stream 1 and 2 pipelines, the developments plunged Germany’s economy into a technical recession last year, complete with deindustrialization and stinging inflation.
