Germany

Stronger investment

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Based on strong export growth, the German economy is recovering from three years of stagnation. Weak domestic demand is still weighing on activity although there are signs that investment is strengthening. The upswing should broaden in 2005, as consumer confidence gradually improves.
In 2006 GDP is projected to grow by 2.25%, above potential. The general government deficit is likely to remain between 3.5% and 4% of GDP this year and next, not falling below 3% before 2006.Major reforms of labour and product markets are being phased in. While the short-run impacts on confidence and growth are ambiguous, it is clear that for economic performance to be raised in a durable way these reforms need to be continued and deepened within a coherent framework. Fiscal consolidation needs to be linked to more fundamental spending reform, requiring, for instance, the untangling of responsibilities across different levels of government, more determined reductions in both subsidies and tax expenditures and continued reform of the social security system.
Population (000s), 200382 502
Area (000 sq km)357
CurrencyEuro
GDP (Billion USD), 20032 401.9
Life expectancy at birth (Women, Men), 2001 81.3, 75.6
Total labour force (000s), 200339 507
Government typeFederal Republic
Indicators% change unless otherwise indicated
200420052006
GDP growth1.21.42.3
Household savings ratio11.111.110.8
Consumer price index1.71.30.6
Short-term interest rate (%)2.12.12.7
Unemployment rate (%)9.29.38.9
General government financial balance (% GDP)-3.9-3.5-2.7
Current account balance (% GDP)3.33.94.7
Source: OECD© OECD Observer No. 245, November 2004


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