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Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Germany is the top economic power in Europe and the fourth globally. After experiencing a historic recession in 2020 due to the outbreak of the COVID-19 pandemic, the country grew an estimated 3.1% in 2021 (IMF) despite the fact that the manufacturing and construction sector have been struggling with supply shortages. Recoveries in private consumption and exports are expected to drive growth in 2022, with a projected GDP growth of 4.6% (IMF). Investment shall also be supported by the implementation of the European Recovery and Resilience Plan. In 2023, GDP is expected to grow by 1.7%, assuming a normalisation of supply and demand dynamics, though much will depend on the global COVID-19 situation.

The unprecedented measures taken to fight the pandemic and stabilise the economy – focused on subsidies to companies, prolongation of the short-time work scheme and increased healthcare spending for vaccination and testing - drove an increase in Germany’s budget deficit, which reached an estimated 5.7% in 2021. The phasing out of measures is set to noticeably reduce the deficit thereafter, to 1.6% in 2022 and 0.3% in 2023 (IMF, although the European Commission forecast is less optimistic, at 2% and 0.5%, respectively). Similarly, the debt-to-GDP ratio grew to reach 72.5% in 2021. However, the country is expected to return on a debt reduction path this year (69.8%) and in 2023 (68% - IMF). Consumer price inflation was estimated at 2.9% in 2021, mostly due to rising commodity and energy prices. In 2022, inflation is projected to ease to 1.5%, before slowing further next year (1.3%). Germany’s current account balance returned to the pre-pandemic level in 2021 and should increase in the upcoming years thanks to the rising demand from the country’s main business partners.

Unemployment was estimated at 3.7% in 2021 (IMF). Hiring expectations and the percentage of businesses reporting labour shortages returned close to or higher than the pre-crisis level, setting the stage for a resumption of employment and wage growth. The IMF forecasts a gradual decrease of unemployment to 3.6% this year and 3.5% in 2023. With a GDP per capita (PPP) of USD 54,263, Germany is among the wealthiest countries in the world (World Bank). Nevertheless, according to data by Destatis, around 17.4% of the country's population is at risk of poverty or social exclusion (latest data available).

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 3,888.763,843.34e4,230.174,557.354,774.08
GDP (Constant Prices, Annual % Change) 1.1-4.62.73.82.5
GDP per Capita (USD) 46,80046,216e50,78854,65357,209
General Government Balance (in % of GDP) 1.3-3.1e-5.7-1.6-0.3
General Government Gross Debt (in % of GDP) 59.269.1e72.569.868.0
Inflation Rate (%) 1.40.42.91.51.3
Unemployment Rate (% of the Labour Force) 3.23.8e3.73.63.5
Current Account (billions USD) 289.56266.97287.57316.69343.98
Current Account (in % of GDP) 7.46.96.86.97.2

Source: IMF – World Economic Outlook Database, October 2021

Note: (e) Estimated Data

Main Sectors of Industry

The German agricultural sector is rather limited: it contributes a mere 0.7% of GDP and employs 1% of the country’s workforce (World Bank, latest data available). The main agricultural products include milk, pork, sugar beets, potatoes, wheat, barley and cereals. According to the national statistical office Destatis, in Germany there are around 262,776 agricultural holdings, of which the majority are sole proprietorships, meaning that most farmers run their businesses alone or with their families. In recent years, the number of holdings dedicated to organic farming has been growing steadily, reaching 26,133 in 2021. Especially after the outbreak of the COVID-19 pandemic, more and more agricultural holdings have been trying to reduce the risk of strong income fluctuations by diversifying their income: Destatis reports that half of all agricultural holdings in Germany obtained income from agriculture-related activities in addition to primary agricultural production in 2020.

The industrial sector amounts to about 26.5% of GDP and employs 27% of the country’s workforce. Germany is Europe's most industrialized country, and its economy is well diversified: the automotive industry is the country’s largest sector, but Germany also retains other specialized sectors, including mechanical engineering, electric and electronic equipment, and chemical products. Overall, manufacturing activities alone account for 18% of GDP. The industrial activity is concentrated mainly in the states of Baden-Württemberg and North Rhine-Westphalia, where there are more than half of the 1,600 German manufacturing companies identified as global market leaders.

Germany’s service sector is a leading employer (72% of the workforce) and contributes to 63.4% of the country’s GDP. The sector’s growth in recent years has been primarily driven by a strong demand for business-related services and by the development of new technologies, which contributed to establishing whole new branches in the tertiary sector. The accommodation and food services sector also plays an important role, with a total turnover worth EUR 98 billion (Destatis). The German economic model relies heavily on a dense network of small and medium-sized enterprises (SMEs), often very open to the international environment: according to the latest data from Destatis, around 57% of the total employed persons work in SMEs, with the proportion of persons employed in micro-enterprises amounting to 18%, while 22% work in small and 17% in medium-sized enterprises.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 1.2 27.2 71.6
Value Added (in % of GDP) 0.7 26.5 63.4
Value Added (Annual % Change) 1.7 -7.4 -3.8

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
72,5/100
World Rank:
29
Regional Rank:
16

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
8.31/10
World Rank:
5/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2021-2025

 

Country Risk

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