German GDP expected to contract 0.5% this year, DIHK says

By Maria Martinez

BERLIN (Reuters) - The German economy will contract by 0.5% this year, shrinking for a third consecutive year, the German Chamber of Commerce and Industry (DIHK) said on Thursday, forecasting the longest period of weakness in Germany's post-war history.

"This is a turning point and emphasises the acute need for action," DIHK managing director Helena Melnikov said, noting that a record 60% of companies see the economic policy framework as their biggest business risk.

Increasing competition from abroad, high energy costs, elevated interest rates and uncertain economic prospects have taken their toll on the Germany economy, which contracted in 2024 for a second year in a row.

The survey, conducted among 23,000 companies from all sectors and regions, shows that over the next 12 months, 31% of companies continue to expect business to get worse, while only 14% expect an improvement, the survey showed.

In industry, only 22% of companies are planning more investment, while almost 40% are cutting back.

"If this trend continues, Germany faces the threat of further deindustrialisation," Melnikov said.

Export expectations also remain gloomy, as 28% of companies expect exports to fall over the next 12 months, while only 20% expect sales to other countries to rise.

"Declining competitiveness and increasing protectionism are threatening the export-orientated German industry, which has always been a driver of economic growth," said DIHK head of foreign trade Volker Treier.

(Reporting by Maria Martinez, Editing by Miranda Murray)

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