What economic issues will the German economy be most confronting in 2024?
The largest economy in Europe is anticipated to be still coping with the effects of its most recent economic crisis as 2024 approaches. The German economy faces five major problems in 2024, according to Euronews Business.
In terms of the economy, Germany will struggle in 2024.
With stagflationary pressures hanging heavy and the possibility of a “slowcession” looming large, as evidenced by declining manufacturing output, its GDP growth is predicted to shrink by 0.6% this year.One of the crown jewels of German industry, the automobile sector, is likewise set to struggle, and tight budgetary restraints are likely to make matters worse for consumers and households.
Unfavorable news for the German GDP
A number of prominent global economic institutions have already released pessimistic estimates regarding Germany’s GDP in 2024.According to the International Monetary Fund’s (IMF) most recent estimate, it is expected to be the only major global economy to contract this year, solidifying its position as the most notable example of sluggish growth among major European nations.
Furthermore, the OECD projects that a “slowdown in the world economy” might deal a severe blow to Germany because of declining trade and global interest rate increases that continued into the new year.Due to stagflation in the economy, which is characterized by excessive inflation that persists despite high unemployment and weak demand,
“Entering a state of slowness”
Germany was declared to be in a state of stagnation in 2023; the news publication The Guardian even speculated as to whether the country had entered a “slowcession” due to the unfavorable combination of high inflation and slow growth.To put it in perspective, government spending decreased by 0.2% in the fourth quarter of 2022 but by 1.9% in the first quarter of 2023.
Similarly, it’s important to note that, in 2023, almost 2.6 million people were still unemployed as a result of a gap in the economy. With 191,000, the number was significantly lower in 2022.If Germany’s economic circumstances stay the same, the country’s unemployment rate is predicted to worsen in the upcoming year.
Taking on China
Germany’s automotive industry is its strongest suit as it is the largest automotive market in Europe.Germany’s car sector appears to be struggling with one of the main issues of decline, while being the vanguard of mobility innovation: competing with China.
Despite having a special combination of infrastructure, government support, labor, and industry knowledge, China’s industrial and technological might still surpasses Germany’s in the automotive sector.Germany’s sector currently appears to be declining and is not at the forefront of e-mobility.
Nearly 98% of cars in Germany are still powered by combustion engines, according to the Federal Motor Transport Authority (KBA), therefore most analysts thinkInvestments are being delayed because German business is unable to compete with China’s market domination due to financial restrictions. China is driving Germany to continue relying on its produced goods, such as battery cells, in order to maintain its over 40% market dominance for electric vehicles.
Germany’s Constitutional Court invalidated the government’s decision to reallocate around €59.15 billion in COVID-19 loans to stimulate the economy in the middle of November 2023.The government had intended to utilize the budget to boost the flagging economy, but the court’s decision severely damaged their intentions.
In addition, it created a great deal of agitation among customers and business owners who were unprepared for the financial hit.
weather sabotaging the economy
The German economy is also expected to be negatively impacted by unfavorable weather and climate change.Last year, the nation saw intense rains and extensive flooding, and similar circumstances are predicted to persist in 2024. The El Niño weather pattern, which produces more rain in low-lying areas, is also to blame for the downpours.
The energy sector in Germany is impacted by these erratic weather patterns, especially in terms of the production of oil and gas.El Niño has a “major influence that is not exactly predictable,” according to a representative for Germany’s National Meteorological Service, adding to the uncertainty that would probably cause havoc with the country’s economy.