Economy under pressure: Germany's growth in danger!

In the first quarter of 2024, the German economy recorded slight growth of 0.2 percent compared to the previous quarter, among other things Traffic review reported. This is a positive increase after gross domestic product (GDP) fell by 0.2 percent in the final quarter of 2023. That too Time confirmed this trend, with signs also emerging that private consumption and investment increased in the first quarter.

Nevertheless, the forecasts of the federal government and the International Monetary Fund (IMF) show a bleak outlook for the near future. The federal government expects GDP to stagnate in 2024; an increase of 0.3 percent was originally forecast. The IMF also expects no growth this year. A worrying fact is that Germany may be facing its third year in a row without growth, which would be unique in the Federal Republic's historical data.

Influence of US tariff policy

A decisive factor for the cited uncertainty on the financial markets is US President Donald Trump's customs policy, which has a significant impact on German exports. In 2024, over 10 percent of all German exports, which corresponds to a goods value of over 161 billion euros, went to the USA, Germany's most important trading partner. The stricter US tariff policy has led to advance purchases of goods in the USA, from which Germany was able to benefit in the first quarter, but an increase in tariffs on imports from the EU is seen as a burden on the future economy in Germany.

In addition, the number of unemployed fell by 36,000 to 2.932 million in April 2024, but is still 182,000 above the previous year's level. Timo Wollmershäuser from the ifo Institute expressed fears that the German economy could shrink again in the summer of 2024. The new federal government, consisting of the Union and the SPD, is planning measures to stimulate the economy, including through lower energy costs, a reduction in corporate taxes, more flexible labor law and less bureaucracy.

Katherina Reiche is designated as Robert Habeck's successor to lead the German economy out of the crisis. According to IMF forecasts, positive effects of a federal financial package worth billions can be expected from 2026, while growth of between 1 and 1.5 percent is expected for the German economy in 2026.