German growth leap astonishes: analysts

12th January 2011, Comments 0 comments

The German economy, the biggest in Europe, took off to show 3.6-percent growth last year and staging a "mind-boggling turnaround," in the words of one analyst.

Provisional figures released by the national statistics office showed the county had bounced back from a 4.7-percent contraction in 2009, its worst since World War II, with its strongest gain since reunification in 1990.

This amounts to an astonishing 8.3-percent recovery in total, and means that the German economy grew by about twice the figure of 1.6 percent which the other key eurozone country, France is targeting for 2010.

UniCredit economist Andreas Rees called it "one of the most mind-boggling turnarounds in German economic history" as the nation leapt "from annus horribilis to annus mirabilis."

The public deficit climbed to 88.57 billion euros ($115 billion) however owing to government spending on a stimulus package to reverse the country's fortunes, the Destatis office said.

That amounted to 3.5 percent of national output, clearly above the European Union limit of 3.0 percent, but still low by comparison with the ratio in many EU countries.

Economy Minister Rainer Bruederle said: "We grew by twice the European Union average," and according to forecasts by the EU statistics arm Eurostat, only Slovakia and Sweden will post stronger 2010 growth, at 4.1 percent and 4.8 percent respectively.

With total gross domestic product (GDP) OF 2.498 trillion euros, Germany accounted for 27 percent of the eurozone, which had 16 members last year, the data showed.

German growth was better than that expected for the United States, at 2.7 percent, and Japan at 3.5 percent, but remained well below the level forecast for China of more than 10 percent.

"The economy is on the right path in 2011 ... and we hope to reach pre-crisis levels" this year, Destatis director Roderich Egeler told a press conference.

Forecasts by the German central bank and Eurostat put German growth this year at more than 2.0 percent.

The Destatis data showed that overall domestic demand had played a large role in last year's result, accounting for 2.5 percentage points of the total, compared with 1.1 percentage points from trade with other countries.

"Domestic demand, and particularly corporate investment demand, turned out to be the driving force of growth dynamics in 2010," Barclays Capital economist Frank Engels said.

An economy ministry statement underscored that the number of employed workers in Germany had climbed to an all-time high of 40.5 million people.

General government net borrowing also hit an all-time high at 88.57 billion euros, Engels noted, though German officials have said they are confident of getting back below the EU limit of 3.0 percent of GDP this year.

Economic research institutes have said the public deficit could tumble to 2.7 percent as Germany aims for an essentially balanced budget by 2016 through an austerity plan aimed at realising savings of 80 billion euros by 2014.

Private German growth forecasts for 2011 currently range from 2.2 to 3.0 percent.

Destatis did not provide an official estimate, but ING senior economist Carsten Brzeski said: "Low interest rates, dropping unemployment, a relatively weak exchange rate and strong foreign demand should feed an increasingly self-sustained recovery."

© 2011 AFP

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