July 2, 2025, 10:15 p.m.

Europe

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Research: German economy will shrink slightly this year

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German gross domestic product will shrink slightly this year, according to the latest forecast, as a series of negative reports suggest the outlook for Europe's largest economy remains grim.

Germany's leading economic research institutes said in their outlook Thursday that the economy will shrink 0.1 percent in 2024, compared with a forecast of 0.1 percent growth in March. The German government also takes this forecast into account when compiling its own forecasts.

Geraldine Dany-Knedlik, director of forecasts and economic policy at the Berlin-based German Institute for Economic Research (DIW), said in an emailed statement that "in addition to the downturn, the German economy is also being dragged down by structural changes."

Concerns have grown in recent weeks about a marked downturn in the German economy, with the key car sector particularly hard hit. The weakness in the largest economy is also weighing on the wider euro zone, where a recovery earlier this year has lost momentum.

Germany's central bank has warned that the economy may already be in recession and could shrink again in the third quarter after falling 0.1 per cent in the second.

"Decarbonisation, digitalisation and demographic changes, as well as increased competition from Chinese companies, have triggered structural adjustments that undermine the long-term growth prospects of the German economy," said Danny Kneidlik.

They forecast growth of 0.8 per cent next year, down from the 1.4 per cent forecast in the spring.

The five German institutions that produce these forecasts are DIW, Ifo, IfW, IWH and RWI. Wifo and IHS in Vienna also contributed.

The German government is expected to release its latest economic forecasts next month.

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