Germany's 2024 growth forecast was cut to a 0.2% contraction, facing a second year of decline

The German government has cut its gross domestic product forecast for 2024 to a contraction of 0.2 per cent, in the latest sign of the difficulties Europe's largest economy faces in emerging from a prolonged slump.

A decline in output in 2024, following a 0.3 percent decline last year, would mark only the second consecutive economic contraction since West and East Germany reunified in 1990. In the government's semi-annual forecast released in late April, Economy Minister Robert Habeck estimated the economy would grow 0.3 percent this year.

In an emailed statement Wednesday, Habeck said the slow recovery is likely to take hold next year, with growth projected at 1.1 percent in 2025 and then accelerating to 1.6 percent in 2026.

He stressed that Germany urgently needed to address lingering "structural problems". This includes a lack of energy security, excessive bureaucracy and a shortage of skilled workers. This, along with geopolitical uncertainty, is weighing on economic activity, he said.

"Germany and Europe are caught between China and the United States in a crisis and must learn to stand up for themselves," Habeck said.