After a temporary phase of challenges and economic slowdown, economic activity has picked up again in Germany. Good structural position of Germany and a favorable change in the world economy are helping Germany to recover fast. A high rate of employment coupled with attractive wages is contributing towards faster domestic recovery and is also attracting immigrants. If the world economy continues showing positive signs of recovery and the effects of sovereign debt crisis become less severe than a growth rate of 1.6% can be expected for the year 2013.
But since Germany is an open economy which affects and is affected by external economies the projection for the next fiscal year is uncertain and risky. The political uncertainty in Greece and the dwindling performance of the Banking sector in Spain if persists, will pose threats to the German’s economy.
At present there are three major factors that affect German’s economy:
• Demand for German products has fallen within Euro area as a result of adjustment recession in some Euro area countries.
• A recovery in growth of world economy which has boosted consumption and investment demand of non Euro countries.
• Positive labor market situation and very favorable financing conditions are acting as an impetus for domestic demand.
German’s economy has faced lesser difficulties in the face of crisis as compared to other Euro areas because it has diversified sales market and its economy’s level of confidence and resilience is high.Germany is undergoing safe haven effects which is contributing towards lowering down interest rates for both public and private sector.
Foreign trade: There are expectations of rising exports growth in the outlook for 2013. The BRIC countries and other South-East Asian countries are expected to take the global economic growth up to 3.6% in 2013 and all these South-East Asian countries count upon themselves as a customer of Germans products and services.
Private consumption: Private consumption is likely to increase as a result of slow price rises along with increments in pay, a combination which helped the German’s economy to sail through the tough times in the year 2012. The Government’s expectations regarding 2013 are high. It also expects creation of about 100,000 jobs.
Investment: Investments in Germany dropped drastically to 1.6% in the year 2012, following growth of 6% for two years.The prognosis for 2013 are much better , 2.3% rise is expected, with healthy investment in the construction and investment acting as driving forces. A large number of orders are expected in the outlook for 2013, as a result of more competitive world economy coupled with Germany’s excellent general financial environment.
Exports: Exports are expected to resurge significantly in the year 2013 following the recovery in the crisis hit euro area and the global economy. On the whole, exports could grow by 5.5% in 2013.
Imports: The relatively heavy export growth than the previous year and increase in the domestic demand will call for a considerable increase in imports. If demand grows by 3.5%, then imports can be expected to grow by 7.25% in 2013.Germany’s current account surplus is expected to reach to 5% in 2013.
Consumer price inflation: It will become lax initially.Though energy prices are expected to persist at a high level, but it will probably not rise any further. In 2013,their rate could then fall below 1%. Contrary to this the rate of growth for the other components of the CPI is prognosticated to accelerate moderately from 1.6% in 2012 to 1.8% in 2013.
|Year||GDP % Change||Inflation % Change||Year||GDP % Change||Inflation % Change|
Source: World Bank
|Last Updated on : 21th February 2015||Next Update : February 2016|