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Investing.com -- The German Chamber of Commerce and Industry (DIHK) announced on Thursday that the German economy is projected to shrink by 0.5% this year.
This marks the third consecutive year of contraction, marking the longest period of economic weakness in Germany’s post-war history.
DIHK managing director, Helena Melnikov, highlighted the seriousness of the situation, stating that this is a turning point and emphasizes the acute need for action. She noted that a record 60% of companies identify the economic policy framework as their biggest business risk.
Several factors have contributed to the weakening of the German economy. Increased competition from abroad, high energy costs, elevated interest rates, and uncertain economic prospects have all had a negative impact. The German economy had already contracted in 2024 for the second year in a row.
The DIHK conducted a survey among 23,000 companies across all sectors and regions. The findings revealed that over the next 12 months, 31% of companies expect their business to worsen, while only 14% anticipate an improvement.
The survey also showed a lack of investment plans among companies. In industry, only 22% of companies are planning more investment, while almost 40% are cutting back. Melnikov warned that if this trend continues, Germany could face the threat of further deindustrialisation.
Export expectations for the next 12 months also remain bleak. The survey revealed that 28% of companies expect their exports to fall, while only 20% expect an increase in sales to other countries.
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