German economy shrinks for second year in a row
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First consecutive year of declining GDP since early 2000s highlights challenges facing Germany’s next government. Business live – latest updates. Germany’s economy has shrank for a second consecutive year for the first time in more than two decades, highlighting the challenges the next government will face after snap elections in February.
As voters prepare to head to the polls amid heightened political uncertainty in Europe’s largest economy, official figures showed gross domestic product fell by 0.2% last year after dropping by 0.3% in 2023. The figures represent only the second two-year contraction in the German economy since the 1950s, after it shrank in 2002 and 2003.
“The early 2000s were the last time Germany received the very flattering title of ‘sick man of Europe’. History doesn’t repeat but it rhymes,” said Carsten Brzeski, an analyst at the Dutch bank ING. The German economy has come under intense pressure as the country’s industrial companies cut production amid subdued domestic demand, soaring energy prices and increased competition from Chinese imports.
The latest figures showed manufacturing output was down significantly in 2024, with gross value added falling by 3% compared with the previous year. The decline was led by a sharp drop in car manufacturing, chemicals and energy-intensive industry. Late last year, one of the countries’ biggest employers, Volkswagen, agreed with unions to cut more than 35,000 jobs by 2030 amid a slump in demand – although the carmaker scrapped plans to close plants for the first time.
