The German economy is growing much slower than previously predicted, forcing the center-left coalition in Berlin to impose more cuts. Expectations for 2024 have been drastically revised downwards. This news comes after it was previously announced that Germany has overtaken Japan and is now in third place as the world's largest exporter.
Many did not expect that the German government would reduce the expected growth for 2024 so significantly – from 1.3% to 0.2%. It came as “quite a surprise,” says Almut Balleer of the RWI Institute for Economic Research in Essen. The cause is, among other things, increased international uncertainty due to geopolitical tensions and the consequences of the war in Ukraine.
Nevertheless, Germany remains an economic superpower. Germany overtook Japan last year and is now the third largest economy in the world. This rise in the world rankings is mainly attributed to strong export performance, which is partly driven by growing demand for German goods and services abroad.
“The good news is that inflation has become manageable,” said Finance Minister Christian Lindner. Wages and salaries have increased so that Germans could spend money and stimulate consumption. But people still do not spend as much as expected and choose to save, according to the latest figures.
Last week, Germany received permission from the European Commission to contribute 1.3 billion euros to a plan by the Indian steel group ArcelorMittal to make part of steel production in German blast furnaces more sustainable. The subsidy will be used for the construction of new ovens fueled by natural gas and later entirely by renewable hydrogen, instead of the coal currently used.
The installations will replace outdated factories in Bremen and Eisenhüttenstadt. ArcelorMittal's German greening plan should ultimately lead to CO₂ savings of 70 million tons in sixteen years.