Germany's economic model under scrutiny as growth stalls: Fitch

Several factors have contributed to Germany's underperformance, including the lingering effects of negative shocks such as the 2022 gas supply and price shock, ECB monetary tightening, and a global downturn in trade volumes coupled with weaknesses in the Chinese economy. However, there is room for improvement, with the expectation of a gradual catch-up as these shocks dissipate, Fitch Ratings said in its report titled ‘Germany: Medium-Term Recovery from Lull’.

By the end of 2024, Germany is projected to have the widest negative output gap among developed economies, estimated at around 2 percentage points. While structural constraints, including a slow-growing labour force and dependence on foreign demand, pose challenges, Fitch Ratings predicts a potential recovery in growth from 2024 to 2027, albeit starting slowly.

Addressing these vulnerabilities, Fitch Ratings suggests that greater domestic investment could help reduce reliance on global demand and bolster productivity, potentially steering Germany's economy towards a more sustainable path of growth.

ALCHEMPro News Desk (KD)