FX.co ★ Germany now expects no economic expansion

German authorities no longer expect economic growth in 2024, according to Bloomberg. Sources say that the German government is preparing to downgrade its growth forecast for Europe’s biggest economy. The revised projection points to stagnation at best, a stark contrast to earlier hopes for a modest 0.3% gain.

"Such an outcome would mean yet another lost year" for the German economy, experts warn. The country's economic woes stem from the weakness of its industrial sector, gas supply disruptions, and feeble demand from China.

Analysts view the worsening outlook as a sign of failure for the coalition government. This gloomy forecast could further damage Chancellor Olaf Scholz’s already fragile reputation, especially with less than a year until the next general election. Experts believe that Scholz will face significant challenges in securing widespread voter support. Many voters have already voiced their discontent, as seen in the recent European Parliament election as well as in the eastern states of Germany.

Among the challenges facing the nation are the potential closure of Volkswagen factories and Intel Corp.'s decision to postpone a €30 billion investment to build a chip plant in eastern Germany. This project is now on hold.

Adding to the uncertainty is the looming possibility of Donald Trump’s return to the US presidency, which could spell a "perfect storm" for the German economy and further depress GDP.

Another piece of bad news is a sharp rise in unemployment. While experts had predicted an increase of 3,500, the number of unemployed individuals in Germany jumped to a staggering 17,000.

Despite the bleak outlook, Bundesbank currency strategists do not foresee a severe economic downturn. At the same time, they acknowledge that the German economy may have already slipped into a recession, with further contraction likely.