German economy buffeted by 'perfect storm'

Weaker exports, costly energy and a stuttering green transition have combined to form a "perfect storm" for the German economy, leaving Chancellor Olaf Scholz's coalition bickering over how to change course.

The government will unveil its latest economic forecasts for 2024 on Wednesday, with media reports suggesting a sharp downgrade to a mere 0.2 percent growth.

In its autumn projections, the government was still expecting output to expand by 1.3 percent.

The country ended 2023 in recession, shrinking by 0.3 percent, and the latest data suggest the first quarter of 2024 will see another contraction.

Germany also risks facing anaemic growth up to 2028 if no action is taken, German media said.

The German economy, Europe's largest and traditionally a driver of eurozone growth, is being buffeted by "a perfect storm", Economy Minister Robert Habeck said earlier this month.

The situation was "dramatically bad", he added.

Germany's once-mighty industrial sector has been hit particularly hard by multiple headwinds.

Having previously relied on cheap Russian gas imports, the sector is still reeling from the energy price surge triggered by Russia's invasion of Ukraine.

The European Central Bank's streak of interest rate hikes to tame inflation has added to the pain, dampening demand and investments.

Exports have slumped on weaker trading with key markets such as China, which increasingly produces its own goods. Geopolitical tensions including shipping disruptions in the Red Sea have added to trading woes.

The long-promised shift to a greener economy meanwhile, requiring major public and private investment, has run into fresh hurdles after a shock legal ruling last year forced the government to...