Population 81.779 million
GDP 3366.651 US$ billion
@rating
country
Business climate
assessment
| 2010 | 2011 | 2012(e) | 2013(f) | |
|---|---|---|---|---|
|
GDP growth (%)
|
4.2 |
3.1 |
0.9 |
0.6 |
|
Inflation (yearly average) (%)
|
1.1 |
2.4 |
2.1 |
1.8 |
|
Budget balance (% GDP)
|
-4.1 |
-0.8 |
-0.1 |
-0.5 |
|
Current account balance (% GDP)
|
6 |
5.7 |
6.3 |
5.8 |
|
Public debt (% GDP)
|
82.6 |
80.6 |
82 |
80 |
| (e) Estimate (f) Forecast | ||||
STRENGTHS
- Solid industrial base (1/4 of GDP)
- High quality and diversity of production contribute to competitiveness and profitability
- Innovation, Research and Development
- Strong foothold in emerging markets (1/3 of exports)
- Central role of export-oriented SMEs (Mittelstand) with a strong family and regional base
- Central and eastern Europe integrated in the production process
- Importance of the Hamburg, Bremerhaven and Kiel ports
WEAKNESSES
- Demographic decline
- Lack of engineers
- Low female employment rate
- Highly dependent on world markets
- Considerable importance of car production and exports
- Persistent backwardness of eastern Länder
- High cost of energy with renewable energy target of 80% by 2050
Risk assessment
Somewhat sluggish economy dependent on household demand
After a sluggish start, activity could begin to recover in the second part of the year. The weak growth will depend on household spending. Households will again benefit from higher disposable income, due to wage rises and a rather accommodative fiscal policy. The income tax threshold will be raised as will the minimum pension and mothers who want to stay at home to look after young children will receive an allowance. Despite sizeable immigration, unemployment is not expected to rise much. In a still tight labour market, businesses will prefer to retain their employees, if necessary using the public provisions still in force to compensate part-time working. Slower inflation will also favour consumption. Housing construction is expected to benefit again from low interest rates and the limited confidence in financial investments.
Exports, which represent half of GDP, could slow again due to sluggish demand in much of the continent. 37% of exports are to the eurozone, 20% to the rest of the European Union, 7% to the United States and 6% to China. The strong growth of sales to non-European countries will only partially offset declining or weak growth in European countries. At the same time, imports could accelerate slightly in line with household demand. Finally, the contribution of trade to growth could be zero or negative.
Business investment, after declining in 2012, could stabilise in the first half-year before taking off again in the second, provided that exports improve during the year. The fact that the economy is performing a little above potential because of investment backlogs accumulated during the crisis could work favourably.
Solid external and public accounts
The public accounts were nearly in balance in 2012. This is broadly explained by the fall in the rates at which the country borrows, lower unemployment-related spending and the end of the economic stimulus measures. There is likely to be a slight public account deficit in 2013, due to some generous fiscal and social measures in favour of households and businesses. The weakness of the deficit, in the absence of any additional financial support to the peripheral eurozone countries or of further recapitalisation of financial institutions should make it possible to begin reducing debt, which will remain above the maximum level set by the EU authorities. The September 2013 elections, in which Angela Merkel is the favourite, will not fundamentally, change the situation.
Despite weak export growth, there will still be a good trade surplus. With the balance of services in equilibrium and a positive revenue balance, there is also a large current account surplus. These surpluses are matched by big asset acquisitions abroad (direct investments, shares, bonds) and also the accumulation by the Bundesbank since 2010 of considerable claims on fellow euro zone members.
Payment behaviour on the whole satisfactory but some significant outstanding payments and weakness of certain sectors
On the whole, company payment behaviour remains satisfactory thanks to good profitability and extensive self-financing. The number of bankruptcies has fallen to the pre-crisis level. The strong role played by SMEs in the regional economic fabric, where they can obtain credit from cooperative or mutual banking institutions or savings banks, which know them well, works positively for them. Their top-of-the-range products, to which substantial spending on research and development contributes, allows businesses to control their prices and resist competition from imports, both on their own market and abroad, and to project themselves outside Europe and absorb labour costs.
However, significant payment failures were recorded in 2012 in the wake of resounding bankruptcies such as those of Neckermann (mail order selling), Schlecker (cosmetics, healthcare and household products retailing), Siag Schaaf (wind power) and Getränke Ring (drinks). Several sectors are weaker than the average – namely, second and third tier vehicle component manufacturers, the iron and steel industry and the steel trade, solar panels due to Chinese competition plus reduced tax advantages, fruit juice production because of the high cost of raw materials and the pressures from large-scale distribution, the transport of goods and public works.
