The German Ministry of Economy has trimmed its 2024 GDP growth forecast to 0.2 percent, a revision announced by its head, Robert Habeck. The ministry had earlier projected a 1.3 percent increase for 2024, signaling a notable slowdown in the near term amid shifting global conditions. Habeck also projected a 1 percent expansion for 2025, outlining a gradual recovery path for the economy while acknowledging headwinds that persist on the international stage.
The trimmed outlook reflects a combination of fragile global trade volumes, sustained higher interest rates, and a slower pace of construction investment. Habeck emphasized that these factors have weighed on domestic activity, particularly in the construction sector, where investment has cooled as borrowing costs remained elevated and project pipelines were delayed. The ministry maintains that the German economy is navigating the aftershocks of recent disruptions and ongoing shifts in global demand, with some sectors showing resilience while others lag behind expectations.
Habeck noted that the path to recovery is being taken with caution, highlighting Germany’s relative stability following the decision to phase out dependence on Russian oil and oil products. While this energy transition has strengthened energy security, it has also introduced transitional challenges for industries accustomed to previous supply terms. The government’s forecast assumes inflation will ease alongside the broader growth trajectory, helping to anchor price stability as the economy absorbs international shocks and adjusts to changing energy and trade dynamics.
Economy officials anticipate inflation dropping to about 2.8 percent in 2024 before easing toward the central bank’s 2 percent target in 2025. This expected decline would support household purchasing power and possibly rekindle investment and consumption, though the pace of improvement will hinge on external influences such as trade conditions, currency movements, and commodity prices. The forecast underscores the balancing act between sustaining momentum and preventing overheating in an environment of elevated financing costs and persistent geopolitical uncertainty.
In related remarks, Christian Lindner, head of Germany’s Finance Ministry, addressed concerns about rising poverty and the broader distributional impact of the economic slowdown. His comments reflect policymakers’ awareness that slower growth can widen income disparities and place pressure on social programs. The government has signaled a willingness to implement targeted measures to support households and workers most affected, while continuing to pursue structural reforms that aim to boost productivity, unlock investment, and maintain fiscal discipline as the economy transitions through this period of adjustment.