Germany’s economy is facing a bleak outlook, with economists predicting a second consecutive year of shrinking output in 2024, according to a new Bloomberg survey.
Analysts now forecast a 0.1% contraction in GDP next year, following a 0.3% decline in 2023 – a significant downgrade from last month’s prediction of stagnation.
While Germany narrowly avoided a technical recession in the third quarter with 0.2% growth, this followed a sharper-than-expected 0.3% slump in the second quarter. Further details on the Q3 performance are expected Friday. However, the overall outlook has deteriorated, fueled by rising political uncertainty.
The re-election of Donald Trump in the US has added considerable weight to the negative forecast. Bundesbank President Joachim Nagel warned this week that Trump’s threatened trade tariffs could shave a full percentage point off German economic output. Given the already weak growth projections, this could push the economy into negative territory, Nagel cautioned.
Economists are divided on the precise impact of Trump’s return to the White House. While some surveyed have already adjusted their GDP forecasts, incorporating a 0.1% to 0.2% drag, Landesbank Baden-Württemberg holds a more pessimistic view, predicting a 0.9 percentage point reduction in output by 2025.
The survey also revised downward the growth forecast for 2025 to 0.7% from 0.8%, while maintaining a projection of 1.3% growth in 2026.
