Germany’s industry lobby expects Europe’s biggest economy to shrink for a third straight year this, with GDP contracting 0.1 percent year-on-year.
At the same time, the eurozone economy will grow by 1.1 percent and the global economy by 3.2 percent, the BDI industry association said yesterday.
“The situation is very serious,” BDI president Peter Leibinger said in a statement. “Industrial growth in particular has suffered a structural break.”
Photo: EPA-EFE
Most analysts are slightly more upbeat, with the median prediction for this year seeing expansion of 0.4 percent, but after GDP shrank for a second consecutive year last year, the country’s prospects for this year remain bleak.
GDP fell by 0.2 percent last year after dropping 0.3 percent in 2023, the German Federal Statistics Office reported on Jan. 15.
The Bundesbank predicts growth of just 0.2 percent and warns another contraction is possible if US President Donald Trump implements the trade tariffs he has threatened on China and others.
The German central bank said last week in its monthly bulletin that the economy is “unlikely to emerge from its long period of stagnation” in the first quarter, citing manufacturing weakness and dampened private spending.
All that is bad news for German Chancellor Olaf Scholz, who is set to lose a snap election on Feb. 23. BDI’s Leibinger said the next government — likely headed by the conservative CDU/CSU bloc under Friedrich Merz — must implement reforms and boost investment.
The economic crisis is more than just a consequence of the pandemic and Russia’s invasion of Ukraine, Leibinger said, adding that the problems are home-made and the result of a structural weakness since 2018 that governments have failed to tackle.
“Companies need timely signals of relief and a determined agenda for more growth,” he said. “Financial scope is limited, so clear priorities must be set in the budget. What strengthens growth must be given priority. Public investment in modern infrastructure, in transformation and the resilience of our economy is urgently needed.”
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