Germany’s economy is on track to shrink for a second year running, Berlin said on Wednesday.
Gross domestic product (GDP) is now predicted to shrink by 0.2 percent this year, in stark contrast with the government’s prediction in April that it would grow by 0.3 percent.
The German economy shrank by 0.3 percent in 2023.
“In addition, economic effects such as persistently weak domestic and foreign demand and the continued restrictive monetary policy are weighing on economic development.”
As a result, it concluded that “German economic output will fall by 0.2 percent in real terms this year.”
Vice Chancellor and Economy Minister Robert Habeck said that the economy hasn’t seen serious growth since 2018 due to structural problems within Germany and international issues.
“The upturn is therefore being delayed once again, but now mainly not because of cyclical factors that have become worse or developed more slowly, but because structural factors are making it so much more difficult,” he said in a statement.
“In the middle of the crises, Germany and Europe are squeezed between China and the U.S., and must learn to assert themselves.”
Habeck said that the government had dealt with many of the nation’s internal problems, including the energy supply, planning procedures, cutting bureaucracy, and addressing the skilled worker shortage.
However, Germany’s Chamber of Commerce and Industry said that those measures needed to be implemented quickly and that further reforms are still required to encourage investment.
Its chief executive, Martin Wansleben, said, “There has never yet been such a prolonged phase of weakness in the German economy.”
A report by the German Institute for Economic Research (DIW) showed a steadily widening gap between the proportion of income low-income groups spend on rent in comparison to wealthier households.
“Rents in Germany have risen significantly in recent decades. Asking rents rose by an average of 50 percent between 2010 and 2022 alone, and by as much as 70 percent in large cities. Existing rents climbed by an average of 20 percent in the same period,” the report states.
“The analysis shows that the 20 percent of households with the lowest incomes have to shoulder the highest rental burden. In 2021, they paid more than a third of their income on rent, while the 20 percent with the highest incomes only paid around a fifth.”
Single parents and those living alone are particularly vulnerable, spending on average 30 percent of their income on rent, compared to around 20 percent for families with children.
The DIW study authors cautioned against rent controls, saying they do not specifically aid low-income groups, instead calling for targeted support for low-income renters and an expansion of social housing.
Berlin had set a target of building 400,000 apartments annually in 2021; however, only 294,400 apartments were built last year.
