Economic trends
Germany is Europe's largest economy, which explains its leading role in managing the current debt crisis of the eurozone. Over the last few years, its performance was not optimal due to the country's vulnerability to outside shocks, domestic structural problems and ongoing difficulties in integrating the formerly communist eastern part. Strongly hit by the international financial crisis, Germany went into recession in 2009 and then recovered growth in 2010 (3.3%) under the combined effects of the stimulus plan and the resumption of international trade and investment. Some believe that the pre-crisis level of activity will be reached as soon as at the end of 2011.
After resuming in 2010, growth in Germany slowed down in 2011 as a result of the debt crisis in the eurozone. Growth for 2011 is estimated at 3% (IMF) and prospects for 2012 are bleak, due to the return of the specter of recession.
The main challenge for the German government is managing the debt crisis of the eurozone, which undermines confidence and growth. While seeking to reduce its budget deficit and high public debt, Germany will exert pressure on the eurozone countries to reduce their budget deficits in compliance with the December 2011 European agreement (which puts the maximum structural deficit at 0.5% of GDP). Continued recapitalization of the banking sector will also be necessary. Despite this restrictive policy, the government will seek to protect funding for education and research. The unpopularity of the bailout of financially weak European countries among German taxpayers also represents a political risk.
Despite the gravity of the recession, Germany has managed to keep its unemployment rate at around 6.5%, and it is now further decreasing. However, the challenge of integrating the former East Germany, where unemployment is very high, persists.
Main branches of industry
The German agricultural sector contributes about 1% of the GDP and employs about 2,5% of the active population. The sector has greatly benefitted from State subsidies. Main agricultural products are milk, pork and livestock farming, sugar beet and cereals. Consumers prefer organic agriculture. The country is going through a process of deindustrialization of the food sector.
The contribution of the industrial sector to the GDP has dropped from 51% in 1970 to about 29% today. However, the German economy still has some specialized sectors such as mechanical engineering, electric and electronic equipment, automotive and chemical products. The automotive industry is one of the country's largest industrial sectors and Germany the world's 3rd largest exporter of cars. German decision to abandon civil nuclear energy by 2022 is also likely to remodel the German industrial landscape.
The tertiary sector contributes about 70% to the GDP. The German economic model relies mainly on a dense network of SMEs; there are more than 3 million of them employing 70% of the salaried workers.
International trade
Trade represents more than 85% of Germany’s GDP; with exports representing about 40% of GDP, Germany is a leader in exports (only recently caught up with by China). In spite of the eurozone crisis, exports and imports remained strong throughout 2011 and the country maintains a comfortable trade surplus. The growth of foreign trade should slightly slow down in 2012.
The whole of the European Union is its primary trade partner: around 60% of German exports and 60% of its imports are done with the EU. China and the U.S. are the other two main partners
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Last updates: May 2012
