Information about Economy Of Germany

Economy of Germany
Frankfurt is Germany's main financial center
Currency	Euro (EUR)
Fiscal year	Calendar year
'''Trade organisations	EU, WTO (via EU membership) and OECD
Statistics
GDP (PPP)	$2.585 trillion (2006 est.) (5th [https://www.cia.gov/library/publications/the-world-factbook/rankorder/2001rank.html])
GDP growth	2.7% (2006) [1]
GDP per capita	$31,400 (2006 est.)
GDP by sector	agriculture (0.9%), industry (29.1%), services (70%) (2006)
Inflation (CPI)	1.7% (2006)
Population below poverty line	11% (2001)
Labour force	43.66 million (2006 est.)
Labour force by occupation	services (63.8%), industry (33.4%), agriculture (2.8%) (2006)
Unemployment	6.2% (July 2007)
Main industries	iron, steel, coal, cement, chemicals, machinery, vehicles, machine tools, electronics, food and beverages, shipbuilding, textiles
Trade
Exports	$1.133 trillion f.o.b. (2006 est.)
Export goods	machinery, vehicles, chemicals, metals and manufactures, foodstuffs, textiles
Main export partners	France 10.6%, U.S. 9.3%, UK 8.4%, Italy 7.4%, Netherlands 6.2%, Austria 5.3%, Belgium 5.1%, Spain 4.9%, Switzerland 4% (2003)
Imports	$916.4 billion FOB (2006 est.)
Import goods	machinery, vehicles, chemicals, foodstuffs, textiles, metals
Main import partners	France 9.2%, Netherlands 8.4%, United States 7.3%, Italy 6.3%, UK 6%, Belgium 4.9%, the People's Republic of China 4.7%, Austria 4% (2003)
Public finances
Public debt	$1.93 trillion (66.8% of $2.89 trillion, nominal GDP) (2006)
Revenues	$1.277 trillion (2006)
Expenses	$1.344 trillion; including capital expenditures of $NA (2006 est.)
Economic aid	donor: $7.5 billion, 0.28% of GDP (2004) [2]
[https://www.cia.gov/library/publications/the-world-factbook/geos/gm.html#Econ Main source] All values, unless otherwise stated, are in US dollars

Germany is one of the world's most highly developed market economies. It is the world's third largest economy in USD exchange-rate terms,^[1] the fifth largest by purchasing power parity (PPP),^[2] and the largest economy in Europe.

Although recent performance has been dynamic, due to a strong world economy, the German economy is marked by domestic structural problems, and continued difficulties in fuelling formerly communist East Germany.

Competition and free enterprise are promoted as a matter of government policy. However, the state intervenes in the economy through the provision of subsidies to selected sectors and the partial ownership of enterprises in sectors of strategic importance .

The German economy is heavily export-oriented, with exports accounting for more than one-third of national output. As a result, exports traditionally have been a key element in German macroeconomic expansion. Germany is a strong advocate of closer European economic and political integration, and its economic and commercial policies are increasingly determined by agreements among European Union (EU) members and EU single market legislation. Germany uses the common European currency, the Euro, and its monetary policy is set by the European Central Bank in Frankfurt, Germany.

Most foreign and German experts agree that there are/ were domestic structural problems to be addressed. Beginning in 2003, the government gradually deregulated the labour market to tackle formerly high unemployment. As a result employment levels are on the upswing and the unemployment rate fell to 7.3% (August 2007) in West-Germany. The situation in post-communist East-Germany remains problematic at 14.7%. The overall unemployment rate was 8.8%. By ILO standards, the unemployment rate was lower, at 6.2% (July 2007 figure).^[3] Further issues, which are being addressed by governmental policies, are high non-wage labour costs and bureaucratic regulations that burden businesses and the process of starting new businesses.

Nevertheless, the export oriented economy is doing extremely well. Export growth in 2007 is estimated to be 9%, underscoring Germany's role as the world's biggest exporter. GDP growth in 2006 was 2.7% and is forecasted to retain its strength in the following years.

A problem can be seen in the weak domestic market, most likely stemming from stagnating wages over more than a decade. Germany finances its reunification to a large extent by social insurance contributions, forcing up non-wage labour costs. To conserve the competitiveness of German workers, unions have abandoned high wage demands since the mid-1990s. According to the Federal Statistical Office of Germany, the average net income after deduction of consumer price rises declined by 2% between 1991 and 2005). However, in 2007 collective bargaining sessions, unions' wage demands were strongly up compared with averages of the last decade.

Primary sectors

In 2004 agriculture, forestry, and mining accounted for only 1.1% of Germany’s gross domestic product (GDP) and employed only 2.2% of the population, down from 4% in 1991. Much of the reduction in employment occurred in the eastern states, where the number of agricultural workers declined by as much as 75% following reunification. However, agriculture is extremely productive, and Germany is able to cover 90% of its nutritional needs with domestic production. In fact, Germany is the third largest agricultural producer in the European Union (EU) after France and Italy. Germany’s principal agricultural products are potatoes, wheat, barley, sugar beets, fruit, and cabbages. Despite Germany’s high level of industrialization, roughly one-third of its territory is covered by forest. The forestry industry provides for about two-thirds of domestic consumption of wood and wood products, so Germany is a net importer of these items.

Mining and minerals

Coal is Germany’s most important energy resource, although government policy is to reduce subsidies for coal extraction. Coal production has declined since 1989 as a result of environmental policy and the closing of inefficient mines in the former East Germany. The two main grades of coal in Germany are “hard coal” and lignite, which is also called “brown coal.”. Despite its considerable reserves, environmental restrictions have led Germany to become a net importer of coal. Also as of January 2004, proven natural gas reserves were 10.8 trillion cubic feet, the third largest in the EU. Nearly 90% of Germany’s natural gas production takes place in the state of Lower Saxony. In 2002 Germany imported 2.4 trillion cubic feet of natural gas, or 75% of its requirements. The most important source of natural gas imports is Russia, with a 40.8% share, followed by Norway at 31.5%, and the Netherlands at 22.3%.

Energy

In 2002 Germany was the world’s fifth largest consumer of energy, and two-thirds of its primary energy was imported. In the same year, Germany was Europe’s largest consumer of electricity; electricity consumption that year totalled 512.9 billion kilowatt-hours.

Government policy emphasizes conservation and the development of renewable energy sources, such as solar, wind, biomass, hydro, and geothermal. As a result of energy-saving measures, energy efficiency (the amount of energy required to produce a unit of gross domestic product) has been improving since the beginning of the 1970s. The government has set the goal of meeting half the country’s energy demands from renewable sources by 2050. In 2000 the government and the German nuclear power industry agreed to phase out all nuclear power plants by 2021. However, renewables currently play a more modest role in energy consumption. In 2002 energy consumption was met by the following sources: oil (40%), coal (23%), natural gas (22%), nuclear (11%), hydro (2%), and other renewables (2%).

Industry

Industry and construction accounted for 29% of gross domestic product (GDP) in 2003, a comparatively large share even without taking into account related services. The sector employed 26.4% of the workforce. Germany excels in the production of automobiles, machine tools, and chemicals. With the manufacture of 5.5 million vehicles in 2003, Germany was the world’s third largest producer of automobiles after the United States and Japan, although the People's Republic of China was threatening to displace Germany in the world rankings as early as 2005. In 2004 Germany enjoyed the largest world market share in machine tools (19.3%). German-based multinationals such as Daimler-Chrysler, BMW, Bosch, BASF, Bayer, and Siemens are brand names throughout the world. What is less well known is the vital role of small- to medium-sized manufacturing firms, which specialize in niche products and often are owned by management (see also: Mittelstand). These firms employ two-thirds of the German workforce.

Service sector

In 2003 services constituted 70% of gross domestic product (GDP), and the sector employed 71.3% of the workforce. The subcomponents of services are financial, renting, and business activities (30.5%); trade, hotels and restaurants, and transport (18%); and other service activities (21.7%).

Tourism

Main article: Tourism in Germany

Domestic and international tourism generates about 8% of gross domestic product (GDP) and 2.8 million jobs. Following commerce, tourism is the second largest component of the services sector. In 2004 Germany registered 45 million overnight stays by international tourists, 4% higher than in the previous year and an all-time record. Two-thirds of all major trade fairs are held in Germany, and each year they attract 9 to 10 million business travellers, about 20% of whom are foreigners. The four most important trade fairs take place in Hanover, Frankfurt, Cologne, and Düsseldorf. Germany’s hosting of the FIFA World Cup in 2006 presented an opportunity for the tourism sector.

Financial Services

By tradition, Germany’s financial system is bank-oriented rather than stock market-oriented. The process of disintermediation, whereby businesses and individuals arrange financing by directly accessing the financial markets versus seeking loans from banks acting as intermediaries, has not fully taken hold in Germany. One of the reasons that banks are so important in German finance is that they have never been subject to a legal separation of commercial and investment banking. Instead, under a system known as universal banking, banks have offered a wide range of services from lending to securities trading to insurance. Another reason for the strong influence of banks is that there is no prohibition of interlocking ownership between banks and their client companies. However, in January 2002 the government moved to discourage this practice and promote more rational capital allocation by eliminating the capital gains tax on the sale of corporate holdings from one company to another.

At the end of 2000, 2,713 out of 2,931 German financial institutions (92.6%) were universal banks, including 354 commercial banks, 1,798 credit cooperatives, and 561 savings banks. The non-universal banks specialized in such activities as mortgage banking and investments. The list of the six largest German banks illustrates the diversity of bank structure and ownership. Of the top six banks, ranked by total assets as of year-end 2002, four are private, but the fifth largest is public, and the sixth largest is a cooperative.

Despite the central role of banks in finance, stock markets are competing for influence. The Deutsche Börse (German stock exchange), a private corporation, is responsible for managing Germany’s eight stock markets, by far the largest of which is the Frankfurt Stock Exchange, which handles 90% of all securities trading in Germany. The leading stock index on the Frankfurt exchange is the DAX, which, like the New York Stock Exchange’s Dow Jones Industrial Average, is composed of 30 blue-chip companies. The other German stock exchanges are located in Berlin, Bremen, Düsseldorf, Hamburg, Hanover, Munich, and Stuttgart. Xetra is Germany’s electronic trading platform. As of the end of 2004, the total market capitalization of the German stock markets was nearly US$1.1 trillion, representing about 45% of gross domestic product (GDP). The shares of some 684 companies trade on the exchanges.

Trade

In 2003 Germany conducted slightly more than half of its trade within the then 15-member EU, followed by, in order of volume, developing countries, Eastern Europe (including countries like Poland that subsequently joined the EU), the United States and Canada, non-EU Europe (Switzerland, Norway, Liechtenstein, and Iceland), and Japan. Increasing emphasis is being placed on trade with Russia and the People's Republic of China. The 2005 Hanover trade fair devoted much of its attention to Germany’s growing economic and trade ties to Russia, particularly in the area of energy. Germany is Russia’s top trade partner. In 2002, the People's Republic of China overtook Japan as Germany’s top trade partner in Asia, and Germany is investing heavily in that rapidly rising economic power.

German trade is consistent with the policy of the European Union (EU) to expand trade among the 25 member states and also with the goal of global trade liberalization through the latest Doha Round of the World Trade Organization (WTO). Germany uses its position as the world’s leading merchandise exporter — a fact that partially reflects the strength of the euro — to compensate for subdued domestic demand. German companies derive one-third of their revenues from foreign trade. Therefore, Germany is committed to reducing trade restrictions, whether involving tariffs or non-tariff barriers, and improving the transparency of foreign markets, including access to public works projects.

The United States is Germany's second-largest trading partner after France. Two-way trade in goods totalled $88 billion in 2000. German exports to the USA totalled $58.7 billion while US imports to Germany were $29.2 billion. Germany's main exports to the USA include motor vehicles, machinery, chemicals, and heavy electrical equipment, while imports from the USA included aircraft, electrical, telecommunications and data processing equipment, and motor vehicles and parts.

Exports and imports

In 2003 Germany imported US$601.4 billion of merchandise, while imports of goods and services totalled US$773.4 billion. Principal merchandise imports were motor vehicles (US$64.4 billion), chemical products (US$63.2 billion), machinery (US$41.8 billion), oil and gas (US$39.9 billion), and computers (US$30.5 billion). Germany’s main import partners were France (9.0%), the Netherlands (7.8%), the United States (7.3%), Italy (6.1%), the United Kingdom (6.1%), Belgium (4.9%), China (3.8%), and Austria (3.8%).

In 2003 Germany exported US$748.4 billion of merchandise, while exports of goods and services totalled US$873.3 billion. Principal merchandise exports were motor vehicles (US$145.5 billion), machinery (US$103.0 billion), chemical products (US$92.9 billion), electrical devices (US$36.2 billion), and telecommunications technology (US$35.1 billion). Germany’s main export partners were France (10.6%), the United States (9.3%), the United Kingdom (8.4%), Italy (7.4%), the Netherlands (6.2%), Austria (5.3%), Belgium (5.0%), and Spain (4.9%).

Germany's main exports:

• Machinery
• Vehicles
• Chemicals
• Metals and Manufactures
• Foodstuffs
• Consumer electronics
• Textiles
• Beer

Germany's main imports are:

• Machinery
• Vehicles
• Chemicals
• Foodstuffs
• Textiles
• Metals

CIA Factbook 2005

Balance of payments and currency

In 2003 the current account balance was a positive US$54.9 billion, or 2.2% of gross domestic product. In 2003 Germany posted a merchandise trade surplus of US$147 billion. In 2002 total public debt was about US$1.5 trillion, or 60.8% of gross domestic product.

Germany’s currency is the euro. Because Germany has adopted the euro, the Bundesbank, which had been responsible for conducting monetary policy and maintaining a stable German mark, has ceded much of its previous influence to the European Central Bank.

Foreign Investment

In 2003 net foreign direct investment was inbound US$11 billion.

Investments

Germany follows a liberal policy toward foreign investment. During the period 1998-99, France was the largest source of direct investment, followed by the United Kingdom and the United States (18%). From 1995 to 1999, annual average flows of U.S. direct investment in Germany were $3.4 billion, while those of German investors in the United States reached $21 billion. In terms of cumulative position (historical cost basis), German investment in the United States was valued at $111 billion in 1999, having more than doubled since 1995, while U.S. investment in Germany was worth just under $50 billion, having grown 12% since 1995.

Despite persistence of structural rigidities in the labour market and extensive government regulation, the economy remains strong and internationally competitive, not least because of its highly skilled work force. Although production costs are high, Germany is still an export powerhouse. Additionally, Germany is strategically placed to take advantage of the rapidly growing central European countries. The current government has addressed some of the country's structural problems, with important tax, social security, and financial-sector reforms. In the future, Germany faces further fundamental (and perhaps even more sweeping) economic adjustments to boost growth and job creation.

Labour force

The distribution of Germany’s workforce by sector is very similar to the relative output of each sector. In 2004 the workforce was distributed as follows: agriculture, 2.2%; industry, 26.4%; and services, 71.3%. Participants in the workforce totalled 38.87 million. In Summer 2007, Germany’s seasonally adjusted national unemployment rate decreased to 9%, or nearly 3,8 million people. Both statistics represented post-war records. Unemployment approached 20% in some states in the East, where high wages are not matched by productivity. However, by September 2005 overall unemployment had declined to 11.2%, or 4.65 million people. Germany's national unemployment rate is only partially comparable to unemployment rates in the United Kingdom or United States, because it includes a significant share of part-timers, who work less than 15 hours a week. Everyone working less than 15 hours a week, who is seeking and available for a job with full social security insurance (normally full-time job or part-time above 15 hours a week), can be registered as unemployed. Around one quarter of Germany's national unemployment are underemployed part-timers.

Additionally the percentage of so called "long-term sick" in Germany is significantly lower than in the United Kingdom, Sweden or the United States, countries with very low official unemployment rates. Financial support for sickness in these countries normally lasts longer, is easier to reach or is higher than aid for unemployment. Experts believe that many of these "long-term sick" are in reality discouraged workers, who have no perspective in the job market. Most of these people in Germany are registered as unemployed, because unemployment aid is not limited in duration and being "sick" is not more lucrative. As a labour market performance index and for the actually situation on the German labour market, the German job index BA-X has been established in early 2007.

At the start of 2005, the seasonally adjusted number of registered unemployed persons initially showed another sharp increase. The considerable rise in the unemployment figures is largely due to the fact that former recipients of income support who now receive the new class-II unemployment benefit are registered as unemployed. This means that people who used to be numbered among the latent manpower reserve are now shown as registered unemployed persons. In particular, the labour-market statistics now include more unemployed young, older and low-skilled people.

Other statistics

Investment (gross fixed): 17.6% of GDP (2004)

Household income or consumption by percentage share:

• lowest 10%: 3.6%
• highest 10%: 25.1% (1997)

Distribution of family income - Gini index: 28.3 (2000)

Agriculture - products: potatoes, wheat, barley, sugar beets, fruit, cabbages; cattle, pigs, poultry

Industrial production growth rate: 2.2% (2004 est.)

Electricity:

• production: 560 TWh (2003)
• consumption: 519.5 TWh (2003)
• exports: 53.8 TWh (2003)
• imports: 45.8 TWh (2003)

Electricity - production by source:

• fossil fuel: 61.8%
• hydro: 4.2%
• other: 4.1% (2001)
• nuclear: 29.9%

Oil:

• production: 74,100 barrel/day (2003)
• consumption: 2.891 million barrel/day (2003)
• exports: 12,990 barrel/day (2003)
• imports: 2.135 million barrel/day (2003)
• proved reserves: 395.8 million barrel (1 January 2004)

Natural gas:

• production: 21 billion m³ (2003)
• consumption: 99.55 billion m³ (2003)
• exports: 7.731 billion m³ (2003)
• imports: 85.02 billion m³ (2003)
• proved reserves: 293 billion m³ (1 January 2004)

Private financial assets: €4.07 trillion (2004)

Reserves of foreign exchange & gold: $96.84 billion (2003)

Debt - external: NA

Economic aid - donor: ODA, $5.6 billion (1998)

Exchange rates:

• Euro:

July 2005: 1.20 USD = 1 EUR

January 2000: 0.99 USD = 1 EUR

1999: 0.94 USD = 1 EUR

• Deutsche Mark:

January 1999 1 USD = 1.69 DEM

1998 1 USD = 1.76 DEM

1997 1 USD = 1.73 DEM

1996 1 USD = 1.50 DEM

1995 1 USD = 1.43 DEM

See also

• German model
• Trade unions in Germany
• Taxation in Germany
• Common Agricultural Policy
• Economy of Europe
• Great power - Germany
• European Union

References

- Germany

External links

• Is the US a Good Model for Reducing Social Exclusion in Europe? August 2006
• OECD's Germany country Web site and OECD Economic Survey of Germany
• Federal Statistical Office Germany
• MySME Information for foreign SMEs in Germany (In English)
• German Embassy (Washington, D.C.), Economic Trends
• Germany and the Future of the Transatlantic Economy, Policy Bulletin by the Atlantic Council of the U.S.
• Germany’s growth performance in the 1990’s - Published by the European Commission and in particular dealing with the influence of the reunification on German growth rates

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