As of: March 15, 2024, 6:12 p.m
By: Bona Hyun
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The German economy shrank last year – will the weak phase continue?
There are gloomy forecasts from Habeck's ministry.
Berlin – How is the German economy doing?
Currently the answer is: rather bad.
The economy is weakening and concerns are growing.
This also causes unrest in the federal government.
For 2024, the traffic light significantly lowers the forecast for economic growth and assumes a GDP (gross domestic product) increase of 0.2 percent.
Current data from Economics Minister Robert Habeck (Greens) also shows gloomy forecasts for the German economy for the time being.
Gloomy forecasts from Habeck's ministry: This is the state of Germany's economy
A noticeable economic recovery is currently not in sight, according to a statement from the Federal Ministry of Economics on Friday (March 15th), which
is available to
fr.de.
“Weak domestic demand, high financing costs and the still subdued mood among private households and companies continue to speak against a recovery,” the ministry writes in the statement.
Habeck's ministry is assuming that the economy in Germany will probably not recover for the time being.
© Kira Hofmann/imago
In view of the overall still weak indicator situation and the continued high level of uncertainty among private households and companies, most economic research institutes are assuming a further slight decline in GDP in their latest economic forecasts for the first quarter of 2024.
An improvement is only expected as the year progresses.
Germany's economy in crisis?
There are also positive developments
According to the report, there are also positive trends - such as in industrial production, construction and foreign trade at the beginning of 2024. German trade in goods, especially exports, also started the new year with significant increases.
There were also positive developments in the manufacturing sector.
According to the Federal Statistical Office, production rose by +1.0 percent in January compared to the previous month.
This marks the first noticeable increase in 11 months.
In addition, inflation has been trending downward since March 2023.
The inflation rate was 2.5 percent in February 2024.
This is the lowest value since June 2021. In January the rate was 2.9 percent.
How is the economy in Germany?
Signals for stable foreign trade
In view of the weak economic phase, the labor market continues to be robust overall, and demand for work also remains at a high level.
At the same time, unemployment increased slightly by 11,000 people in February, and employment and employment subject to social security contributions increased noticeably in January and December.
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Current leading indicators would also suggest a stabilization of foreign trade.
The ifo export expectations brightened slightly in February (from -8.5 points to -7.0).
While export expectations in the electrical sector improved, they remained subdued for the major vehicle manufacturers;
in mechanical engineering they even fell to their lowest value since June 2020.
Problems for the German economy: Insolvencies among companies are increasing
After a setback in German foreign trade in December, increases in exports and imports point in a positive direction in January 2024.
But there are risks due to ongoing geopolitical tensions and an economic slowdown in important trading partner countries such as China.
Things continue to look less good for companies that have to expect an increase in insolvencies: According to the early indicator of insolvency trends from the IWH (Leibniz Institute for Economic Research Halle), company insolvencies rose by 10.8 percent in February compared to the previous month.
According to the IWH, this is the highest value since IWH data collection began in 2016. The IWH expects the number of insolvencies to continue to rise in the coming months.
(bohy)