Main Industry SectorsEconomic OverviewForeign Direct Investment [FDI]FDI Government MeasuresCountry Strong PointsCountry Weak PointsForeign Trade Overview
The German agricultural sector contributes about 1% of the GDP and employs about 2,5% ofthe active population. The sector has greatly benefitted from State subsidies. Main agricultural products are milk, pork and livestock farming, sugar beet and cereals.Consumers prefer organic agriculture. Germany is going through a process of deindustrialization of the food sector. The contribution of the industrial sector to the GDP has dropped from 51% in 1970 to about29% today. The German economy still has some specialized sectors such as mechanicalengineering, electric and electronic equipment, automotive and chemical products.
The automotive industry is one of the countrys largest industrial sectors, and is the worlds 3rdexporter of cars. The crisis has affected German industry, especially the automotive sector as well as equipment, with adecrease in orders and the implementation of partial unemployment plans. The tertiary sector contributes about 70% to the GDP. The German economic model relies mainly on a dense network of SMEs; there are more than 3 million of them employing 70% of the salaried workers.
Germany is Europes primary economy.Germany’s performance has not been dynamic due to the countrys vulnerability tooutside shocks, domestic structural problems and the permanent difficulties ofintegrating the formerly communist eastern part.Strongly hit by the international financial crisis, Germany went into recession in 2009and then recovered growth in 2010 (3.3%) under the combined effects of the stimulusplan and the resumption of international trade and investment.Due to the good economic situation, the governments priority is now to deal with thebudget deficit, which soared during the crisis and to implement measures favoringinvestment and new technologies, in order to diversify the economy and no longerdepend on exports.Despite the gravity of the recession, Germany was able to contain its unemploymentrates around 8%, thanks to the adopted measures.The integration of the former Eastern Germany, where the unemployment rate remainsvery high, nevertheless continues to pose problems.
Germany is an attractive country for direct foreign investment. Due to the global financial crisis, the FDI flows dried up and should remain less dynamic even in thecoming years. Germany’s strengths are: a fabric of the industrial sector which is dense and powerful, a skilledworkforce which has a good command of the English language, as well as a geographic location in the centerof Europe. Germanys main weakness is its high taxation rate (of both individuals and corporations).
The Germany government is implementing mesures aimed at encouraginginvestments in the country: Financing by the European Union and/or by German federal entities; Aid aimed especially at the initial investment phase but also at the operationalphase of the project.
Germanys strong points are: A strategic location at the center of Europe; The biggest population of the European Union; Advanced technology and expertise; A highly qualified work force; Competitive taxation.
Public finances are structurally highly in deficit. The eastern part of the country is struggling to catch up in many fields. The ageing population weighs heavily on growth. The unemployment rate poses a real challenge for the development of thecountry and its future influence..
Trade represents more than 80% of Germanys GDP; with exports representing about 40% ofGDP, Germany is a leader in exports (only recently caught up with by China). The global recession which has lead to a decrease in exports reduced the positive trade balance ofthe country, however since the beginning of the recovery, trade balance shows comfortable surplusand this trend should continue in the coming years. The whole of the European Union is its primary trade partner: around 60% of German exports and60% of its imports are done with the EU. China and the U.S. are the other two main partners.
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