Germany’s economy is predicted to stagnate in 2024, despite a stronger-than-expected start to the year. According to IW, manufacturing and the construction sector are still in recession, with consumption being the only positive factor as it increases with easing inflation. However, this is not enough to spark a real upswing, as investments continue to lag behind due to geopolitical tensions and high interest rates.

Last year, Germany contracted by 0.2%, making it the weakest big euro zone economy. IW predicts zero growth for Europe’s largest economy in 2024 while other countries such as France, Italy, Britain and the United States are expected to see expansion. Despite narrowly avoiding a recession at the beginning of the year with a 0.2% growth in Q1, Germany’s outlook remains uncertain.

Foreign trade is projected to remain weak and offer little economic stimulus, while Germany’s unemployment rate is projected to rise to an average of 6% for the year from 5.7% in 2023. With an average of 46 million employed people in 2024, the impact of economic weakness on Germany’s labor market is becoming more noticeable. IW economist Michael Groemling emphasizes that policy actions are needed to improve business conditions and unlock Germany’s potential for growth.