- Germany’s GDP shrank by 0.2% in 2024, marking the second consecutive year of contraction.
- Energy crisis, inflation, and decreased demand for exports have deepened the economic crisis.
- The UK saw minimal 0.1% growth in November, with concerns over stagnation amidst high inflation.
Germany’s economy continues to face severe challenges, shrinking by 0.2% in 2024, following a 0.3% contraction in 2023. The energy crisis triggered by the Russian invasion of Ukraine, compounded by global supply chain issues, has severely impacted the country’s financial stability.
Germany’s traditionally strong export sector has also struggled, especially with increasing competition from Chinese-made electric vehicles.
UK and German Economies Face Critical Challenges Amid Inflation and Stagnation
In the UK, economic growth was marginal, with a 0.1% increase in November. While there was slight improvement in services, driven by sectors like wholesale and hospitality, manufacturing and business services experienced declines. The overall lack of meaningful growth has raised concerns about a potential stagflationary environment as inflation continues to outpace expectations.
The collapse of Chancellor Scholz’s coalition government in November over disagreements regarding the “debt cap” further deepened the crisis. Finance Minister Christian Lindner’s refusal to increase government borrowing led to a breakdown in the coalition, which added political instability to an already fragile economic situation. This has prompted calls for urgent reforms to address Germany’s stagnating infrastructure and technological competitiveness.
Meanwhile, the UK’s economy is showing signs of stagnation despite a slight increase in GDP in November. The services sector experienced modest growth, driven mainly by retail and IT, but manufacturing saw contraction. Construction showed positive results, mainly due to commercial developments, though these gains were not sufficient to offset broader economic challenges.
Experts have expressed concerns that the UK economy may be heading toward stagflation, a condition where growth remains slow but inflation remains high. With core inflation remaining above target, there are growing calls for a reduction in borrowing costs to stimulate the economy, though any significant changes in interest rates are not expected in the near future.
Both Germany and the UK face uncertain economic futures, with stagnation and inflation threatening their financial stability. Immediate reforms are needed to avoid prolonged economic hardship.
“Although it is a welcome sign that the UK economy has recorded the first growth in three months, it appears there remains a long way to go before we see more meaningful growth.” – Kevin Brown, savings specialist at Scottish Friendly
