German businesses expect the country’s economy to contract by 0.5% this year, which would mark the second straight year of decline and the worst downturn in twenty years, a poll of over 27,000 companies carried out by the DIHK chambers of industry and commerce revealed.
Of those surveyed, 35% expect business to deteriorate over the next 12 months, while only 14% expect an improvement.
Meanwhile, 29% of respondents rated the current state of the business climate as “good,” while 22% expressed the opposite view. The 0.5% decline projected by the DIHK poll contrasts with the German government’s official projection of 0.2% growth.
Germany has been hit by a severe crisis in recent years, as energy prices have surged, while a shortage of skilled workers and weak domestic demand weigh on the nation’s economic performance. GDP declined by 0.3% year-on-year in 2023, making it the only G7 economy to shrink in 2023.
“The bad mood among companies is becoming more entrenched,” the DIHK said, adding that if the poll’s projection comes to pass, it would be only the second time in Germany’s post-war history that the economy contracted for two years in row.
The country did face similar challenges back in 2002 and 2003, when two consecutive recessions forced Berlin to introduce aggressive labor market and welfare reforms that were credited with elevating the competitiveness of the country’s economy.
“This is a clear alarm signal that Germany and Europe must take seriously,” DIHK head Martin Wansleben said in a statement.
The European Commission had previously issued a downbeat projection that Germany would be the biggest drag on EU growth in both 2023 and 2024, with modest gains of 0.3% in 2024 and 1.2% in 2025.
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