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), 2005 | 82 466 |
| Area (000 sq km) | 357 |
| Currency | Euro |
| GDP (Billion USD), 2005 | 2 461 |
| Life expectancy at birth (Women, Men), 2004 | 81.4, 75.7 |
| Total labour force (000s), 2005 | 41 040 |
| Government type | Federal Republic |
| Indicators | % change unless otherwise indicated |
|---|
| 2006 | 2007 | 2008 |
|---|
| GDP growth | 2.6 | 1.8 | 2.1 |
| Household savings ratio | 10.5 | 10.3 | 10.1 |
| Consumer price index | 1.7 | 1.9 | 1.0 |
| Short-term interest rate (%) | 3.1 | 3.8 | 4.0 |
| Unemployment rate (%) | 8.0 | 7.7 | 7.2 |
General government financial balance
(% GDP) | -2.3 | -1.4 | -1.3 |
Current account balance
(% GDP) | 4.0 | 4.8 | 5.2 |
Source: OECD©
OECD Observer No. 258/259, December 2006
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