Germany prepares for double contraction. The first since the beginning of the century – European Union

The German Government is less optimistic for this year and is already predicting a new contractionwhich follows the drop in activity in 2023 of 0.3%. These are two consecutive years with the product shrinking, something that has not happened since the beginning of the century, in 2002 and 2003.

But for 2025, Berlin already expects even modest growth in Europe’s largest economy. “Economic conditions are not satisfactory at the moment”, said Economy Minister Robert Habeck this Wednesday, guaranteeing that “we are working to get out of this situation.”

The German official, however, sounded a note of optimism, pointing out “effective progress” in combating the factors that dragged Germany into negative territory, such as inflation, high interest rates (although this depends on the European Central Bank) and energy costs driven by the Russian invasion of Ukraine in late February 2022.

According to projections known this Wednesday, October 9, gross domestic product (GDP) is expected to contract by 0.2% this year, below the previous forecast of real GDP growth of 0.3%. Furthermore, the economy may already be in a technical recession – with two consecutive quarters of activity contraction – with a possible contraction in the third quarter after a 0.1% drop in output between April and June.

However, in the next two years the activity should show greater dynamism. For 2025, Olaf Scholz’s Executive expects annual growth of 1.1%, to then accelerate to 1.6% in 2026. In a note, the Economy Minister highlighted the urgent need to move forward with resolving the “structural problems” that persist, adding that “Germany and Europe are squeezed between China and the USA and have to learn to assert themselves” . Habeck pointed out energy insecurity, excessive bureaucracy and a shortage of specialized labor which, combined with geopolitical uncertainty, are limiting economic activity.

In recent months, the European Union’s largest economy has been struggling with successive collapses in several sectors, especially the heavy automotive industry, with Volkswagen announcing the first closure of a factory in the country and layoffs.

With agencies