itstargetnews
BERLIN (AP) – Germany’s economy shrank for a second straight year in 2024 as worried consumers cut back on spending and Chinese competition ate into the country’s traditional exports of cars and industrial machinery.
The year’s weak performance underlines Germany’s status as Europe’s worst-performing main economy and shows the country has not seen significant growth in the past four years as it has struggled to cope with major changes in the global economy.
Gross domestic product shrank 0.2 percent last year, after a 0.3 percent decline in 2023, according to preliminary official data released weeks earlier on Wednesday. a choice in which the economy is the main problem.
The economy is now only 0.3% larger than in 2019, the year before the COVID-19 pandemic.
German companies have been hit by external shocks and local problems, triggering an angst-filled national debate about how to remedy the situation. Tripartite coalition government of Chancellor Olaf Scholz collapsed in November when Scholz fired his finance minister in a dispute over how to revitalize the economy. This paved the way for early elections on 23 February.
The aspirants to lead the next government have done contrasting proposals on how to give new vigor to the economy.
Ruth Brand, the head of the statistics office, ticked off the list of short- and long-term challenges: rising energy prices after the loss of cheap natural gas from Russia; high interest rates from the European Central Bank that discourage investment in new machinery and vehicles; and forward-looking consumers who are saving their wages instead of spending them.
Spending on hotels and restaurants fell by 4.4% and spending on clothing and footwear fell by 2.8% despite the increase in disposable income.
Added to this is growing competition for China’s export markets in traditional areas of German strength such as cars, industrial machinery and chemicals.
Other, more chronic problems include excessive bureaucracy and a shortage of skilled labor.
“German exports were exposed to stronger international competition, especially from the People’s Republic of China,” Brand said. “German Exports Shrink Even as Global Trade Rises in 2024”.
“The German economy is mired in stagnation,” said Nils Jannsen of the Kiel Institute for the World Economy. And the outlook for growth next year is “gloomy”, he said, with the “sword of Damocles” hanging over the export-oriented economy from possible new US trade measures such as tariffs higher tariffs on imported goods from the incoming president’s administration. elect Donald Trump, who takes office on Monday.
