Germany

Brighter outlook
Based on strong export growth, output is projected to improve. While weak consumption and construction investment are still weighing on activity, equipment investment has strengthened.
As the upswing broadens, real GDP is projected to grow slightly above potential, 1.75% (adjusted for working days) in both 2006 and 2007. The general government deficit is likely to total 3.9% of GDP in 2005, and remain high in 2006, but then fall to 2.6% in 2007, largely on account of an increase in the value added tax rate.For economic performance to be raised in a durable way, the new government has to go further in reforming labour and product markets within a coherent framework. Fiscal consolidation needs to be linked to more fundamental spending reform, requiring, inter alia, 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), 200482 491
Area (000 sq km)357
CurrencyEuro
GDP (Billion USD), 20042 740.7
Life expectancy at birth (Women, Men), 2003 81.3, 75.5
Total labour force (000s), 200440 033
Government typeFederal Republic
Indicators% change unless otherwise indicated
200520062007
GDP growth1.11.81.7
Household savings ratio10.610.610.5
Consumer price index2.01.71.3
Short-term interest rate (%)2.22.22.9
Unemployment rate (%)9.39.18.7
General government financial balance (% GDP)-3.9-3.6-2.6
Current account balance (% GDP)4.14.65.2
Source: OECD© OECD Observer, No. 252/253, November 2005


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