Germany Expects Economy to Shrink 0.2% This Year, SZ Says

(Bloomberg) -- The German government expects the nation’s economy to shrink by 0.2% this year, Sueddeutsche Zeitung reported ahead of an official estimate due on Wednesday, without saying how it got the information.

The updated forecast will be officially presented by Economy Minister Robert Habeck. Bloomberg reported on Sept. 30, citing people familiar with the matter, that Berlin will revise its earlier prediction of a 0.3% expansion to stagnation at best.

The outcome would mark the second year of contraction for Europe’s largest economy.

Germany’s outsized industrial sector faces headwinds from slow Chinese demand, the aftermath of the energy crisis, and difficulties in the transition to electric vehicle production. Another lost year could also spell trouble for the ruling coalition’s already difficult budget planning for 2025.

Habeck remains optimistic about the future, he told Munich-based SZ, and looks for Germany’s gross domestic product to rise by 1.1% in 2025 and by 1.6% in 2026.

This more optimistic scenario is dependent on a swift implementation of the government’s latest growth initiative, Habeck said. Those measures include tax breaks for companies willing to invest, and permanently lower electricity prices for manufacturers.

Germany’s leading economic research institutes on Sept. 26 looked for the nation’s GDP to contract by 0.1% in 2024 before returning to growth of 0.8% next year.