Germany’s government has sharply downgraded its economic forecast, now expecting Europe’s largest economy to shrink by 0.2% in 2024, according to media reports.

This marks a dramatic shift from the previous estimate of 0.3% growth. The revision comes as hopes for a consumption-driven recovery fade amid weak domestic and international demand.

Germany, the only major advanced economy to contract in 2023, has been hit by industrial slowdowns, cooling export demand, and rising energy costs due to Russia’s invasion of Ukraine.

Despite earlier hopes of recovery, economic headwinds persist, with a reluctance in consumer spending. However, the government remains optimistic, forecasting 1.1% growth for 2025 and 1.6% by 2026.