Germany the largest economy in Europe is set to decline third Consecutive year in 2024

Germany, the largest economy in Europe, recently published its annual government report, revealing its GDP is expected to grow by 0.3% in 2025. This projected growth rate declined from the previous growth rate of 1.1%. In contrast, the German Industry Association revealed that the country’s economy is expected to grow by 0.1% in 2025, marking the third consecutive year of decline.

Reports on Germany’s export and import growth rates indicate that the economic fundamentals, monetary policies, and government efforts are not sustainable for lasting growth. Let’s take a deep insight into Germany’s exports and import market, and the factors restricting growth. –

Germany: The Old Sick Man of Europe

Germany, the largest economy in Europe and 3^rd in the world, known for its social market economy, has been struggling with declining economic growth for the last two years. As per reports, Germany will again face a negative growth rate in 2025. Let’s take a look at export and import trends in 2025 based on 2024 data –
Also Read: How Does Fall in Germany’s Export May Affect the Trade Performance?

1. Germany’s economic growth rate declined year-on-year; despite the decline, it maintained a trade surplus trend in each quarter of 2024.
2. From Q1 to Q3 of 2024, exports declined by $9.7 billion, whereas imports increased by $2.4 billion.
3. Germany’s trade surplus stood at $61.7 billion, in Q3 of 2024.
4. The pace with German imports is rising, and dependency on foreign goods is increasing. The market space for domestic manufacturing and production units will be more challenging and competitive.

Germany’s Top Trading Partners in 2024?

The USA Is the largest importer of goods from Germany, worth 132.7 billion collectively in the first three quarters of 2024. Among the top five importing partners, the US became the only country with whom German exports successively increased from Q1-Q3 of 2024. On the other hand, exports to France, Netherlands, Poland, and China decreased by $3.6, $1.1, $0.8, and $2.1 billion respectively in the same period.

France and China are among the largest partners, and the import value of goods from Germany declined. This shows how emerging economies are affecting the existing market with their exports.

Value USD billion

What Germany Exports to The Worlds?

Over the years, Germany has developed a well-constructive manufacturing capacity and cutting-edge technology for new-age developments and established the best economic model, the Social Market Economy.  This makes Germany a key leading player in the auto sector. Let’s understand this with some trade stats mentioned below –

1. Export of Therapeutic medicament under HS code 300490 from Germany stood at $71 billion from Q1 to Q3 of 2024, with the slightest decline of $1.3 billion in Q2.
2. The export of Aeroplanes, etc. under HS code 880240 increased by around 15.9% in Q3 of 2024, compared to Q1 of 2024.
3. Export of Motor cars under 870323, Immunological products (300215), and gearboxes (870840) stood at $12.3, $8.8, and $4.1 billion, respectively.

Value USD Billion***

What are the factors behind Germany’s slow economic growth rate?

Lack of Policy Continuity –

Due to an unstable government and political crisis, the growth initiative taken by the Government for economic growth could not be implemented for long or changed after the new one came.

Energy Crisis –

Not only Germany, but the whole of Europe came under the impact of the energy crisis triggered by the Russia-Ukraine conflict.  Germany’s local businesses and consumers suffered a lot due to its high reliance on Russian gas, resulting in high energy prices.

Lack of Global Demand –

The global goods demand and supply halted due to rising geo-political challenges such as the Russia-Ukraine conflict, the Israil-Hamas-Iran conflict, the potential supply chain disruption in the Middle East and the Red Sea crisis. Further, the US and EU sanctions on Chinese goods affect Germany’s local business and manufacturing with limited supply to China.

Trade Tension and sanctions –

The US and the EU sanctions on importing goods from Russia pose a severe risk to Germany’s economy, which is heavily reliant on imports of essential goods from Russia.

Structural Issues –

This is the main cause of the slow economic growth rate. Structural challenges include an ageing population, shortage of skilled labor, bureaucratic hurdles, etc. affecting the country’s long-term growth rate.

Germany: The Golden Opportunity for Export Business

Though Germany is facing an issue of reviving its economy, the strong industrial base and technological advancement offer a golden opportunity for export business. Here are some key sectors –

Advanced Manufacturing –

Over the years, goods from Germany have earned a global reputation for high-quality machinery, industrial equipment, automotive, etc. offering opportunities for manufacturing, construction, agriculture, etc. sectors.

Cutting Edge Technology and Innovation –

Germany is the key leading player in renewable energy technologies like solar, wind, and bioenergy. Businesses associated with energy sectors can take advantage of Germany’s expertise to capture the market size.

Specialized Products –

Germany offers a wide range of specialized products, precision instruments, and high-quality consumer goods for various industries and niche markets.

Conclusion –

Germany’s economy is under pressure due to geo-political challenges, structural issues, and the US trade warfare. However, its strong economic base, technological advancement along manufacturing capacity make it the largest economy in Europe.  Stable government, financial assistance, trade talks, and constructive policies may help a country to achieve lasting growth.