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Germany

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EconomicPoliticalStructural

Euromoney Country Risk editor’s view

Germany is Europe’s largest economy and the most populous country in the European Union.  The country has operated as part of the Eurozone since its inception in 1999.  Germany operates a federal parliamentary republic.  The current chief of state is President Christian Wulff, and the current head of government is Chancellor Angela Merkel.  The economy has a highly qualified labor force.  Germany’s major exports include value added products such as machinery, vehicles and chemicals.  Classified by the World Bank as a high-income country, Germany is also a member of the Organization for Co-operation and Economic Development (OCED).  

Germany – Quick View
ECR score84.98 (Mar 2011)
ECR rank11 (Mar 2011)
Economic
GDP (2010 Q3)USD 0.88 billion
GNI per capita PPP (2009)USD 36,780
FDI inflow (2009)USD 39,153.63 million
Inflation (2010)1.1%
Central bank assets (2009)USD 76,110.18 million
Unemployment rate (2009)7.60%
Government deficit (2010)USD 106,962.61 million.
Tax revenue (2009)USD 676.06 million
Political
Government typeFederal republic
Recent political crisisNA
Economic freedom score (2011)23rd
Freedom of information score (2010)17th
Corruption perception index (2010)15th (-1 place)
Structural
Birth rate8 per '000
Population balanceUnder 14 - 14%
Population balanceOver 65 - 20%
Life expectancy yearsMale 77.1
Life expectancy yearsFemale 82.4 years
Mortality rate4.1 per '000
Literacy rateMale 99.3%
Literacy rateFemales 98.7%
Internet access72%

[Top] Economic Overview

The German economy ranks 4th in the world in terms of nominal GDP, and it ranks 5th in terms of purchasing power. It is also the second largest trader in the world for both imports and exports.

Even during the recession period, the country’s economy managed to stay stable, possibly due to the major contributions of the country’s industry sector to the national GDP.

(Source: economywatch)

Germany GDP and GDP growth rate

 

(Source: destatis)

Germany's Gross Domestic Product (GDP) at current prices reflects an unstable growth rate. GDP in the third quarter of 2008 was EUR 630.60 billion, which reduced to EUR 577.90 billion in the beginning of 2009, and finally reached EUR 683.60 million in the third quarter of 2010.

The country’s GDP declined by 2.9% in the first quarter of 2009.  However, the GDP in the second quarter of 2010 increased by 2.3%.

The nation’s gross national income (GNI) per capita PPP is USD 36780 for the year (2009), compared to USD 37510 for the year 2008.

(Source:World Bank)

Income tax rate

Germany’s income tax rate is 42%. Additonally, the personal income tax rates are progressive up to 45%.


Taxable income (EUR)

Tax payable (EUR)

Less than 8,004

Nil

8,005 to 52,881

14%

52,882 to 250,730

42%

More than 250,731

45%

The highest tax rate on income, is for individuals that exceed EUR 250,731. 

 

Taxable income (EUR)

Tax payable (EUR)

Less than 16,008

Nil

16,009 to 105,763

14%

105,764 to 501,462

42%

More than 501,462

45%

German residents are taxed on their worldwide income, whereas non-residents are taxed only on their German-sourced income. Income from capital assets is taxed at a uniform rate of 25% once the individual exceeds the tax allowance of EUR 801 (single person) or EUR 1,602 (spouses).

(Source: Central Office of Taxes)

Corporate tax Rate

Standard corporate tax rate in Germany is 15%.

 

Tax contribution

Total tax rate (% profit)

Corporate income tax

15

Social security tax

10

Fuel tax

1.5

Municipal property tax

0.1

Vehicle tax

0.1

Tax on interest

0.6

Value added tax (VAT)

19

(Source: Central Office of Taxes, World Bank)

Inflation rate

Germany Inflation Rate

(Source: destatis.de)

The annual inflation rate in 2010 was 1.1%. However, the inflation, in terms of annual consumer price change, was slightly higher than the previous year (2009: +0.4%).

Foreign direct investment (FDI) inflow

In 2009, Foreign Direct Investment (FDI) inflow in the country was USD 39,153.634 million, whereas in 2008 it was USD 26,804.074 million, reflecting 31.54% rise.

(Source: World Bank)

Banking sector assets

The table below displays the assets of the Central Bank of Germany.

Currency Unit: EUR

 

Assets (millions)

2009

2008

Gold and gold receivables

83,939

68,194

Receivables from the IMF

15,969

( 3,285)

Balances with banks, portfolio investment, external loans and other external assets.

25,634

( 27,705)

Claims on euro-area residents denominated in foreign currency

4,412

63,263

Claims on non-euro-area residents denominated in euro

300

300

Lending to euro-area credit institutions related to monetary policy operations denominated in euro

223,610

277,425

Other claims on euro-area credit institutions denominated in euro

7,136

22,031

Securities of euro-area residents denominated in euro

13,168

-

Claims on the Federal Government

4,440

4,440

Intra-Euro system claims

128,555

189,706

Items in course of settlement

2

2

Other Assets

19,729

17,362

Total Assets

588,043

612,563

(Source: bundesbank.de)

[Top] Financial Indicators & Government Financial

Consumer price index

 

Germany Consumer Price Index

 

 

Base: 2005 = 100

(Source: destatis)

The Consumer Price Index (CPI) in Germany has increased since 2005.  In 2010 CPI was 108.2, increasing by 1.1% since 2009.

(Source: destatis)


Wholesale price index
Germany Wholesale Price Index
(Source: World Bank )

The country’s Wholesale Price Index (WPI) in 2009 was 108.

 

Government expenditure

 

Expenditure

2010

2009

2008

Total expenditure

1,163.89

1,138.71

1,085.62

Intermediate consumption

116.03

111.34

104.80

Compensation of employees

181.59

177.64

170.72

Other taxes on production

0.07

0.07

0.07

Property income

60.38

62.16

66.65

Subsidies

32.68

31.49

27.82

Social benefits in kind

204.39

196.60

185.67

Social benefits other than social transfers in kind

451.94

443.50

421.08

Other current transfers

46.59

45.19

40.33

Capital transfers

37.08

32.76

33.08

Gross capital formation

38.90

39.34

36.78

(Source: destatis.de)

Official exchange rate

Germany Exchange Rate

(Source: bundesbank.de)

 

Government finances

Fiscal balance

Germany Fiscal Balance

(Source: bundesbank.de, bundesfinanzministerium.de)

The estimated fiscal deficit for 2010 was EUR 80,576 million.

Total revenue

The country's revenue in 2009 was EUR 1,066.04 million, decreasing 2.06% from 2008, when it was EUR 1,088.46 million.

Revenue

2010

2009

2008

Total revenue

1,075.32

1,066.04

1,088.46

Payments for the market and for the other non-market output

51.00

48.66

47.03

Other subsidies on production

0.60

0.56

0.37

Property income

17.77

19.66

18.50

Taxes

562.68

564.47

590.14

Social contributions

419.86

409.90

407.78

Other current transfers

14.03

13.29

14.47

Capital transfers

9.38

9.50

10.17

(Source: destatis.de)

Tax revenue

Type of Tax

2008 (EUR billion)

2009 (EUR billion)

Wage tax

141.9

135.2

Profit-related taxes

78.6

58.5

Assessed income tax

32.7

26.4

Corporation tax

15.9

7.2

Investment income tax

30.0

24.9

Turnover taxes

176.0

177.9

Energy tax

39.2

39.8

Tobacco tax

13.6

13.4

Total Tax Revenue

515.5

484.

(Source: bundesbank.de)

The profit related taxes include: employee refunds and grants paid to house owners and investors, which are deducted from revenue.

Investment income tax is withholding tax on interest income and capital gains, and non-assessed taxes on earnings.

Current account balance (CAB)

Current account balance during 2008 was EUR 167.0 billion, which declined to EUR 119.1 billion in 2009. The current account balance is registering a constant decline from 2007 due to heavy deleveraging in the financial sector, which is resulting in a lowering of cross-border lending of the banking sectors.

(Source: bundesbank.de)

Balance of payments

Balance of Payments (EUR million)

 

2009

2008

Exports of Goods and Services

821,202

1,009,066

Imports of Goods and Services

685,758

828,085

Income

33,797

42,617

Current transfers

16,897

18,702

Direct investment

16,950

73,802

Portfolio investment

70,383

9,575

Other investment

46,426

131,096

Reserves Assets

3,200

-2,008

Errors

11,746

30,576

(Source: bundesbank.de)

[Top] Labour Force and Employment Overview

Labour force

The total eligable labour force in the country, including the unemployed, was 43.46 million in 2009, compared to 43.36 million in 2008. 

(Source: destatis)

Labour force participation rate

The number of females in the country’s total labour force consistently increasing. The participation of females in 2009 was 46% of the population. Although this figure is uneven compared to their share in total population, which is 51%, their share in employment has increased over the last two decades, from 41.6% in 1991 to 45.8% in 2009.

(Source: destatis)

Unemployment rate

As per International Labour Organisation (ILO) employment status, the unemployed labour in the country was about 3.31 million in 2009, making a slight rise of 0.4% compared from 2008.

Employment in agriculture

The employment in the agriculture, forestry and fishing sectors was 0.87 million in 2009, compared to 0.86 million in 2008, indicating a marginal increase of 1.14% over the year.

(Source: destatis)

Employment in industries

The employment in production industry, including the construction industry, was 10.22 million in 2008 declining to 10.01 million in 2009, reflecting the major reduction of employment in industrial sector.

(Source: destatis)

Employment in services

A major part of the labour force is employed in the services sector. During 2008 this sector employed 29.27 million, which rose to 29.37 million in 2009.

(Source: destatis)

Level of unionisation

Major trade unions in Germany include:

  • IG Metall
  • IG BCE
  • IG CPK
  • Ver.di
  • HBV
  • IG Medien
  • OTV
  • Free Workers' Union

(Source: flagspot)

Minimum wage

There is no cross-sector statutory minimum wage in Germany, however certain binding minimum wages are declared in several branches.


Area

Term

Wage group 1

Wage group 6

Former territory of the Federal Republic and Berlin

10.03.2010-31.12.2010

8.40

11.13

01.01.2011-31.12.2011

8.55

11.33

New Lander excluding Berlin

10.03.2010-31.12.2010

6.83

8.66

01.01.2011-31.12.2011

7.00

8.88


 

 

 

 

 

Wage group 1 includes: interior cleaning of buildings, maintenance cleaning, and cleaning of land used for traffic purposes. Wage group 6 includes: window and facade cleaning, maintenance of traffic facilities and exterior lighting.

[Top] Political Stability

Germany is divided into 16 federal states: Baden-Wuerttemberg, Bremen, Hamburg, Hessen, Sachsen-Anhalt, Bayern, Berlin, Brandenburg, Schleswig-Holstein, Mecklenburg-Vorpommern, Niedersachsen, Nordrhein-Westfalen, Rheinland-Pfalz, Saarland, Sachsen, and Thueringen. The country’s constitution was introduced on 23 May, 1949 and is known as the Basic Law. However it didn't become the constitution of the united German people till 3 October 1990.

The country’s legislature is bicameral, or consists of two chambersthe Federal Assembly or Bundestag and the Federal Council or Bundesrat.

The major political parties in Germany include:

  • Christian Democratic Union of Germany
  • Social Democratic Party of Germany
  • Free Democratic Party
  • The Left
  • Alliance 90 / The Greens
  • Christian-Social Union in Bavaria

(Sources: worldwide-tax, photius , destatis)

The head of state is the President, who is elected by the Federal Convention. Christian Wulff, the current President, was sworn into office on July 2010. The Chancellor is the head of the government and is appointed by the President. Angela Merkel has been the Chancellor since November 2005, and is the first woman to be elected as Chancellor.

(Source: bundestag.de)

Regulatory environment in Germany

Germany has a federal republic government, where the powers are shared between the state and the national government.

Germany Economic Freedom Indices

(Source: heritage.org)

Germany's economic freedom score is 71.8, making it the 23rd freest economy in the 2011 index. Due to modest improvements in freedom from corruption, and government spending, the overall score has improved slightly. The country ranked 12th out of the 43 countries in the European region, and compared to world average its overall score is remarkably higher. 

Corruption perception

The Corruption Perceptions Index (CPI) is a survey to measure the perceived level of corruption across countries worldwide. Germany is ranked 15th on this list, which indicates a limited level of corruption in public departments of the country.  The country is currently scored 7.9, compared to the previous year score of 8,

(Source: transparency.org)

Freedom of information

The German Freedom of Information Act (Informationsfreiheitsgesetz) came into force on 1 January 2006. It inputs a legal right to access official information held by Federal authorities. However, there are certain number of exemptions. 

Basic Law of the nation guarantees the freedom of the press,  and it provides the right for freedom of information, expression, criticism and independence. WDR, situated in Cologne, is Germany’s biggest radio and TV station, and is one of largest broadcasting and television providers in Europe.

(Source: bundesbank.de, fnf.org)

The World Press Freedom Index 2010 ranks Germany 17th with a score of 4.25, indicating moderate levels of government influence on the media.

(Source: rsf.org)

Judicial system

The Federal Constitutional Court or Bundesverfassungsgericht is the judicial authority of Germany. Half of the judges of this court are elected by the Bundestag (Federal Assembly) and the remaining half are elected by the Bundesrat (Federal Council).

(Source: photius)

[Top] Demographic Overview

Population

The total population of Germany for 2009 was 81.875 million. The country recorded a negative population growth rate of 0.1% in the period 2005 to 2010.

(Source: World Bank)

Gender Ratio

In 2009, there were 96.2 males per 100 females.

(Source: UNdata)

Germany Population by Gender

Country’s population aged below 14 years of age was 14%. 66% of the population was in the age group 15 to 64 and the remaining 20% were 65 years and above.

(Source: World Bank, World Bank, World Bank)

Mortality Rate

The country recorded an infant mortality rate (per 1000 live births) of 4.1 in the period 2005 to 2010.

(Source: UNdata)

Birth Rate

Birth Rate in the country was 8 births per 1000 population in the year 2009.

(Source: World Bank)

Average life expectancy

Average Life expectancy at birth for females is 82.4 years and for males is 77.1 years.

(Source: UNdata)

Ethnicity

Germany’s ethnic group comprises 91.5% Germans and 2.4% Turkish. The remaining 6.1% of the population includes persons of Greek, Polish, Serbo-Croatian, Italian and Spanish origin.Christianity is the major religion practiced in Germany.

(Source:countryreports, BBC)

Migration

Germany had an estimated 10.8 million migrants in mid-2010. These migrants formed 13.1% of the country’s population. Of the total migrant population, the estimated number of males was 5.7 million, with the remaining 5.02 million being females.

(Source: United Nations)

Urbanisation

In this period, the urban population grew at 0.1% and the rural population decreased at an average annual rate of 0.4%.

(Source: UNdata)

Poverty

The Human Poverty Index focuses on the proportion of people who are below certain threshold levels who live a long and healthy life, having access to education and a decent standard of living. Germany is ranked sixth on the Human Poverty Index with a value of 10.1% in 2009.

(Source: UNdata)

Human Development Index

The country is ranked tenth of 169 countries in the United Nations’ 2010 Human Development Index (HDI) with a HDI value of 0.885 and a non income HDI value of 0.915. Germany ranks amongst countries with very high human development.

(Source: UNDP)

[Top] Soft Infrastructure

Education/literacy rate

The gross enrolment ratio for primary education of both males and females is 106%.  Whereas, for secondary education it is 102% for males and 99% for female.  The number of pupils per teacher at the primary level is 14 and for secondary education are 13. The literacy rate of males (above 15 years old) is 99.3% and for females (above 15 years old) is 98.7%. Public expenditure on education is 4.4% of GDP.

(Source: destatis)

Healthcare resources

In 2008, the most common causes of death were cardiovascular diseases (42.2%), followed by malignant tumors (25.6 %), diseases of the respiratory system (7.0 %) and finally, issues with the digestive tract (5.2 %).  Health expenditure incurred in 2008 was EUR 263 billion, indicating a rise of EUR 9.9 billion (3.9 %) compared to the previous year. Public expenditure incurred on healthcare makes up 10.5 % of GDP, or 3,210 Euros per inhabitant.

(Source: destatis)

Monopolised industries

Germany is majorly involved in automobiles manufacturing, followed by heavy automotives, machinery, precision equipments, technology, and software. Even though the recent recession led to a decline in the growth rate, -11% in 2009, the country’s industry sector continues to make a strong contribution to GDP, accounting for about 27.1%.

(Source: economywatch)

[Top] Hard Infrastructure

Mass public transit

Germany’s public transportation system is very efficient and highly developed.  For instance,the Inter City Express (ICE) trains run at a top speed of 180mph. Additonally, the country has a large and well-established network of roads that allows for smooth travelling.

In 2003, the cabinet adopted the Federal Transport Infrastructure Plan 2003. A total of EUR 150 billion is available for road, rail and waterway modes in the period 2001 to 2015.

The total length of roads in Germany in 2010 was 231,000 km, which includes the Autobahn system spanning 12,800 km.

(Source: destatis.de, bmvbs.de)

Ports

Shipping ports in Germany:

Ports Name

Port Location

Port Type

Port Size

Bremen

Port of Bremen

River Port

Medium

Bremerhaven

Port of Bremerhaven

Seaport

Large

Hamburg

Port of Hamburg

Seaport

Very Large

Travemunde

Port of Travemunde

Seaport

Medium

(Source: worldportsource)

Airports

Some of the busiest airports in Germany are:

Frankfurt: It is the largest airport in Germany, which is served by over 125 international airlines. It has 2 terminals and 3 runways.

Munich: It is the second biggest air traffic hub, situated near tlps, and has two terminals.

 

Dusseldorf: It is the third busiest airport in industrial heartland of Germany and has one terminal. It has a paved runway of 9800 ft.

Hahn:It is a hub for low-cost carrier airlines, including RyanAir a low cost carrier, based in Ireland.  This enables the other airports to function more efficently.

(Source: aircraft-charter)

Telecommunications networks

Internet users

According to ITU, there are about 65.1 million internet users in Germany as of June 2010, contributing to 79.1% of the population.

Year

Users

2010

65,123,800

2009

61973100

2007

50426117

2005

47127725

2004

46455813

2000

24000000


(Source:internetworldstats)


The country had 48,700,000 fixed telephone lines in 2009.

There are 105,000,000 mobile subscriptions in the country growing at a rate of 8% between 2004 and2009.

(Source: ITU)

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