The facts on the economy in Germany.
The German economy, the fifth largest economy in the world in Purchasing Power Parity (PPP) terms and Europe’s largest, is a leading exporter of machinery, vehicles, chemicals, and household equipment and benefits from a highly skilled labour force. Like its western European neighbours, Germany faces significant demographic challenges to sustained long-term growth. Low fertility rates and declining net immigration are increasing pressure on the country’s social welfare system and necessitate structural reforms.
Reforms launched by the government of Chancellor Gerhard Schroeder (1998-2005), deemed necessary to address chronically high unemployment and low average growth, contributed to strong growth in 2006 and 2007 and falling unemployment. These advances, as well as a government-subsidised, reduced working hour scheme, help explain the relatively modest increase in unemployment during the 2008-09 recession which was the deepest since World War II, and its decrease to 6.0 percent in 2011.
GDP contracted 5.1 percent in 2009 but grew by 3.6 percent in 2010 and 2.7 percent in 2011. The recovery was attributable primarily to rebounding manufacturing orders and exports, increasingly outside the Euro-zone. Germany’s central bank projects that GDP will grow 0.6 percent in 2012, a reflection of the worsening Euro-zone financial crisis and the financial burden it places on Germany as well as falling demand for German exports.
Domestic demand is therefore becoming a more significant driver of Germany’s economic expansion. Stimulus and stabilisation efforts initiated in 2008 and 2009 and tax cuts introduced in Chancellor Angela Merkel’s second term increased Germany’s budget deficit to 3.3 percent in 2010, but slower spending and higher tax revenues reduce the deficit to 1.7 percent in 2011, below the EU’s 3 percent limit. A constitutional amendment approved in 2009, limits the federal government to structural deficits of no more than 0.35 percent of GDP per annum as of 2016.
Following the March 2011 Fukushima nuclear disaster in Japan, Chancellor Angela Merkel announced in May 2011 that eight of the country’s 17 nuclear reactors would be shut down immediately and the remaining plants would close by 2022. Germany hopes to replace nuclear power with renewable energy. Before the shutdown of the eight reactors, Germany relied on nuclear power for 23 percent of its energy and 46 percent of its base-load electrical production.
Labour force: 43.54 million
Country comparison to the world: 14
Unemployment rate: 5.7 percent
Country comparison to the world: 57