Germany recession fears return ahead of election as economy falls by 0.2% in fourth quarter

The German economy contracted more than expected in the final quarter of last year, spurring again recession fears, as Europe's biggest economy struggles with uncertainty ahead of federal elections.

Germany's gross domestic product fell by 0.2% in the fourth quarter compared with the previous three-month period, preliminary data from the statistics office showed on Thursday.

Analysts polled by Reuters had forecast a 0.1% quarter-on-quarter decrease in adjusted terms.


If first quarter growth for 2025 is also negative, the economy will fall back into recession - normally defined as two consecutive quarters of contraction.

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.

In its annual economic report, the government cut its forecast for this year to 0.3% growth, from a previously expected 1.1% due to trade tensions and growing domestic uncertainty over the upcoming election.

Some business associations forecast another contraction in 2025, putting Germany on track for three years of decline for the first time since reunification.

The dispute over how to revive Germany's ailing economy contributed to the collapse of the government in November, setting the stage for snap elections on Feb. 23, in which the economy is the top concern among voters.