German Economy Dragged by Weak Growth, Rising Layoffs, Bankruptcies
The Reichstag building in Berlin, 2024. Photo: X/ @BudgetGalaxy.
August 2, 2024 Hour: 8:22 am
According to the latest World Economic Outlook report, Germany’s economy is projected to grow by 0.2 percent in 2024.
On Thursday, the Federal Statistical Office reported a 0.1 percent decline in the gross domestic product (GDP) for the second quarter, which marked a persisting economic stagnation amid high inflation, elevated interest rates, and weak export demand.
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“The German economy is stuck in crisis. Hardly any improvement is to be expected in the third quarter of 2024 either. That is indicated by the results of the ifo Business Climate Index in July,” said Klaus Wohlrabe, head of surveys at ifo.
The ifo Business Climate Index, a key indicator of German economic trends, fell to 87 points in July from 88.6 points in June, marking a third consecutive decline, the ifo Institute reported on July 25.
“The economic outlook is deteriorating. Concerns about the economy in the coming months have significantly increased. The German economy is in crisis,” said Clemens Fuest, president of the ifo Institute.
According to the latest World Economic Outlook report released by the International Monetary Fund (IMF) on July 16, Germany’s economy is projected to grow by only 0.2 percent in 2024, lagging behind other major economies.
Although there were initial hopes that the 2024 European Championship hosted by Germany from June 14 to July 14, would invigorate the economy, recent analyses suggested that the event only temporarily boosted consumer spending in tourism, retail, and catering trade, and has not fundamentally addressed the country’s economic sluggishness.
The ZEW Indicator of Economic Sentiment for Germany also declined to 41.8 in July from 47.5 the previous month, reflecting waning confidence in the country’s economic prospects, the Leibniz Center for European Economic Research (ZEW) said on July 16.
“The economic outlook is worsening. For the first time in a year, economic expectations for Germany are falling. The fact that German exports decreased more than expected in May, the political uncertainty in France and the lack of clarity regarding the future monetary policy by the ECB have contributed to this development,” said ZEW President Achim Wambach.
The manufacturing sector, a cornerstone of Germany’s economy, also showed signs of persistent weakness. Manufacturing PMI fell from 43.5 to 42.6 in July, marking the 24th consecutive month of contraction for the sector, according to the Federal Statistical Office. Industrial production, factory orders, and exports all declined for a fifth consecutive month in May.
Unemployment has been getting worse in the European country. Meanwhile, many companies are preparing to cut jobs to reduce costs and improve efficiency. The number of unemployed people in Germany surged in July, up by 82,000 to over 2.8 million on a month-on-month basis, as the economy contracts, the Federal Employment Agency (BA) reported on Wednesday.
The agency also noted that the figure represented an increase of 192,000 year-on-year, bringing the country’s unemployment rate to 6 percent. “The weak economic development is putting a strain on the labor market,” said Daniel Terzenbach, director of regions at the BA.
German auto supplier ZF Group aims to cut 11,000 to 14,000 jobs in Germany by 2028, the company said on July 26, while German rail operator Deutsche Bahn plans to cut 30,000 jobs, or around 9 percent of its staff, over the next five years, with 1,500 posts set to disappear this year. German car parts supplier Continental AG and another auto supplier Bosch have also announced significant layoffs.
Germany is witnessing a significant rise in bankruptcies. German credit agency Creditreform reported on June 25 that approximately 11,000 companies filed for bankruptcy in the first half of 2024, a nearly 30 percent increase from the previous year to reach the highest level since 2016.
In response to these challenges, the German government has introduced several measures. On July 17, the federal government unveiled its 2025 draft budget alongside a comprehensive growth package consisting of 49 initiatives, which are focused on promoting investment, reducing bureaucratic hurdles, incentivizing employment, enhancing financial market efficiency, and strengthening energy infrastructure.
Germany’s economic stagnation is attributable to multiple factors, including high energy prices, overregulation, inadequate infrastructure, a shortage of skilled labor, insufficient raw material supplies, and supply chain disruptions, said Zheng Chunrong, director of the German Studies Center at Tongji University.
Autor: teleSUR/ JF
Fuente: Xinhua
