Germany in 'mindboggling' economic turnaround: analysts

12th January 2011, Comments 0 comments

Germany enjoyed record growth of 3.6 percent last year, official figures showed on Wednesday as the country made what one analyst termed a "mind-boggling turnaround."

The public deficit also grew to 3.5 percent, according to provisional data released by the national statistics office as the government spent heavily on a stimulus package to reverse the fortunes of the biggest economy in Europe.

Activity had contracted by 4.7 percent in 2009 during Germany's worst post-war recession, before rebounding to post the strongest growth since its reunification in October 1990.

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."

Economy Minister Rainer Bruederle noted in a statement that "we grew by twice the European Union average" and underscored that the number of employed workers in Germany had climbed to an all-time high of 40.5 million people.

Germany was now "on the path to full employment," Bruederle reiterated.

Economists pointed out that while German exports contributed as usual to growth, an important development last year was stronger domestic demand, with corporate investment and private consumption also lending a hand.

Germany is Europe's biggest exporter, and Commerzbank chief economist Joerg Kraemer said: "In two years' time, Germany will probably export more to China than to the US."

Meanwhile however, the public deficit also rose to 3.5 percent of gross domestic product.

Berlin ended the year with a deficit of 88.57 billion euros ($115 billion), the Destatis office said, surpassing the EU ceiling of 3.0 percent of GDP.

In 2009, Germany posted a public deficit right at 3.0 percent, following a slight surplus the previous year.

In October, German officials said they were confident of getting back below the EU limit this year, but did not give a forecast figure.

Leading economic research institutes have said it could fall to 2.7 percent however, as Germany aims for an essentially balanced budget by 2016.

Officials have launched an austerity plan aimed at realising savings of 80 billion euros by 2014.

Meanwhile, private German growth forecasts for 2011 currently range from 2.2 to 3.0 percent according to research institutes and economic analysts.

Destatis did not immediately provide an official estimate, but ING senior economist Carsten Brzeski said: "The German recovery will go down as a text book example for a v-shaped recovery.

"Low interest rates, dropping unemployment, a relatively weak exchange rate and strong foreign demand should feed an increasingly self-sustained recovery," he added.

© 2011 AFP

0 Comments To This Article