Germany: A sustainable recovery

The economy has entered a sustainable recovery and is projected to grow above potential throughout the projection period, although growth is expected to fall temporarily below 2% in 2007 in the wake of the value-added tax rate increase. The growth impetus is likely to shift from exports and investment to consumption in 2008, as unemployment recedes and real incomes rise. The government deficit is projected to fall to 2.25% of GDP this year and below 1.5% in 2007 and 2008.
Further expenditure-based fiscal consolidation would improve sustainability and create more room for the operation of automatic fiscal stabilisers. Placement of the long-term unemployed into jobs needs to improve further, including through more effective assignment of placement responsibilities across levels of government. Strengthening competition in product markets–such as in liberal professions and network industries–would make the economy more resilient and raise growth prospects beyond the cyclical recovery.
Population (000s), 200582 466
Area (000 sq km)357
GDP (Billion USD), 20052 461
Life expectancy at birth (Women, Men), 2004 81.4, 75.7
Total labour force (000s), 200541 040
Government typeFederal Republic
Indicators% change unless otherwise indicated
GDP growth2.61.82.1
Household savings ratio10.510.310.1
Consumer price index1.71.91.0
Short-term interest rate (%)
Unemployment rate (%)
General government financial balance
(% GDP)
Current account balance
(% GDP)
Source: OECD©OECD Observer No. 258/259, December 2006

Economic data


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