The German economy will shrink by 0.2% in 2024, data from statistics office Destatis showed on Wednesday, marking the country's second consecutive year of slowdown.

The decline was in line with expectations of economists polled by Reuters, according to data from London Stock Exchange Group. The European Commission and some major German economic institutions have independently predicted that German GDP will fall by 0.1% in 2024.

Ruth Brand, head of Germany's Statistics Office, said "cyclical and structural pressures" were holding back stronger economic development.

"These factors include increased competition in Germany's export industry in key sales markets, high energy costs, persistently high interest rates and an uncertain economic outlook," she said in a statement.

Destatis said both manufacturing and construction suffered losses in 2024, while the services sector recorded growth during the period.

The country has been dealing with a long-term housing construction crisis caused by rising interest rates and construction costs. Several key industries in Germany, including the automotive industry, have also been under pressure for some time. Automakers have been grappling with the transition to electric vehicles and competition from Chinese peers.

Germany's DAX stock index was last higher after the data, rising 0.47% at 10:24 a.m. London time, having already opened higher.

The German economy has shrunk by 0.3% in 2023.

Destatis also released preliminary fourth-quarter gross domestic product (GDP) data on Wednesday, based on available information. Adjusted for price, seasonal and calendar changes, the economy shrank 0.1% in the three months to the end of December from the previous quarter. Destatis noted that a regular first reading of German fourth-quarter GDP will be released later this month.

Robin Winkler, chief German economist at Deutsche Bank, said on Wednesday that while the annual GDP contraction should surprise no one, preliminary data for the fourth quarter of 2024 was unexpected and worrying.

"If confirmed, this would mean that the German economy is once again losing momentum at the start of winter. The current political uncertainty in Berlin and Washington could be an important factor," he said in comments translated by CNBC.

Looking ahead, German economic institute Ifo warned on Wednesday that the German economy will struggle to "come out of stagnation" in 2025 unless economic policy reforms are introduced. In this case, the institute expects "perceived growth" of 0.4% over the period. .

"Without countermeasures, ifo researchers fear manufacturing companies will continue to shift production and investment abroad," the institute said in a statement. "Productivity growth will also remain weak as value added in high-productivity industries and jobs will be replaced by value added in services with low productivity growth.”

Ifo added that with the "right" policies in place, investing and working in Germany could become a more viable option again and the economy could grow by up to 1%.