German economy "clears the clouds", overcomes recession, difficulties are "sweeping" the industry that accounts for 20% of GDP

Recently, the Federal Statistical Office (Destatis) said that the German economy grew slightly by 0.2% in the third quarter of 2024. The information surprised experts because the results reversed the forecast that the economy could fall into a technical recession.

German economy grows slightly. (Source: Shutterstock/esfera)

According to preliminary statistics from Destatis, the Gross Domestic Product (GDP) of Europe's largest economy was boosted by increased government and household spending. However, Destatis also revised the figures for the second quarter of 2024, showing the economy shrinking by 0.3% instead of the previous estimate of a 0.1% decline.

Before the figures were released, the German Economy Ministry predicted a “new mild contraction” in the third quarter of this year. “The economy is unlikely to emerge from the weak phase in the third quarter of 2024,” the ministry said.

If forecasts are correct, after two consecutive quarters of GDP decline, the German economy will fall into a technical recession.

Despite the modest growth, the headwinds have taken a toll on a key industry that accounts for 20% of Germany's GDP.

“The manufacturing sector is suffering from a severe shortage of orders,” the Federation of German Industries (BDI) said in its latest report.

BDI sees industrial output falling 3% year-on-year in the third quarter of 2024, noting that this would be “the third consecutive decline”, with the decline particularly severe in Germany’s top auto manufacturing sector.

Meanwhile, the leader of German automaker Volkswagen also announced that it is considering closing at least 3 factories in Germany and cutting tens of thousands of jobs, in the context that Europe's largest automaker is facing fierce competition from China, especially in the field of electric vehicles.

Volkswagen's third-quarter net profit fell 64% to 1.58 billion euros ($1.7 billion) as it struggled with high costs and slowing sales in China.

In addition to Volkswagen, BMW and Mercedes-Benz both lowered their annual growth outlook in September 2024, due to falling demand from Asia's largest economy.

Long-standing structural challenges are adding to Germany's woes, including complex bureaucracy, underinvestment in infrastructure, an aging workforce and a costly green energy transition.

In the coming time, the Director in charge of the European region of the International Monetary Fund (IMF) Alfred Kammer affirmed that the European locomotive needs structural reforms as well as investment in public infrastructure. To achieve this, he said that Germany "may have to loosen the debt brake".

Germany is the only major economy to see GDP fall in 2023, and the government forecasts a further slight contraction in 2024.

However, Europe's largest economy will see a recovery from 2025, as falling inflation and higher wages are expected to boost consumption.

Source: https://baoquocte.vn/kinh-te-duc-ven-may-mu-buoc-qua-suy-thoai-kho-khan-dang-can-quet-nganh-chiem-toi-20-gdp-292050.html