The report projects the euro area's economy to grow by 0.8 per cent in 2024, while Germany's Gross Domestic Product (GDP) is forecast to shrink by 0.1 per cent. This marks a downgrade from the previously anticipated 0.1 per cent growth for the country.

Germany, the world's third-largest economy, has consistently lagged behind the European Union average since 2021. It is set to contract for the second consecutive year in 2024, making it the weakest performer among the Group of Seven (G7) advanced economies.

"High uncertainty has been weighing on consumption and investment, and the trade outlook has worsened as global demand for industrial goods weakened," the report noted, Xinhua news agency reported.

Looking ahead, the Commission expects domestic demand in Germany to improve, driven by real wage growth. However, the recovery is predicted to be modest, with GDP growth of 0.7 per cent forecast for 2025, revised down from the 1 per cent expansion projected in the spring forecast. By 2026, growth is anticipated to accelerate to 1.3 per cent, though this will still fall short of the eurozone average of 1.6 per cent.

The report highlights that domestic demand will become the primary driver of growth in 2025 and 2026. As inflation eases, real household incomes are projected to recover, leading to a gradual increase in private consumption.