<hdr>The World Factbook 1994: Germany<nl>Economy</hdr><body>
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<item><hi format=bold>Overview:</hi> With the collapse of communism in Eastern Europe in 1989, prospects seemed bright for a fairly rapid incorporation of East Germany into the highly successful West German economy. The Federal Republic, however, continues to experience difficulties in integrating and modernizing eastern Germany, and the tremendous costs of unification pushed western Germany into its deepest recession since World War II. The western German economy shrank by 1.9% in 1993 as the Bundesbank maintained high interest rates to offset the inflationary effects of large government deficits and high wage settlements. Eastern Germany grew by 7.1% in 1993 but this was from a shrunken base. Despite government transfers to the east amounting to nearly $110 billion annually, a self-sustaining economy in the region is still some years away. The bright spots are eastern Germany's construction, transportation, telecommunications, and service sectors, which have experienced strong growth. Western Germany has an advanced market economy and is a world leader in exports. It has a highly urbanized and skilled population that enjoys excellent living standards, abundant leisure time, and comprehensive social welfare benefits. Western Germany is relatively poor in natural resources, coal being the most important mineral. Western Germany's world-class companies manufacture technologically advanced goods. The region's economy is mature: services and manufacturing account for the dominant share of economic activity, and raw materials and semimanufactured goods constitute a large portion of imports. In recent years, manufacturing has accounted for about 31% of GDP, with other sectors contributing lesser amounts. Gross fixed investment in 1993 accounted for about 20.5% of GDP. GDP in the western region is now $19,400 per capita, or 78% of US per capita GDP. Eastern Germany's economy appears to be changing from one anchored on manufacturing into a more service-oriented economy. The German government, however, is intent on maintaining a manufacturing base in the east and is considering a policy for subsidizing industrial cores in the region. Eastern Germany's share of all-German GDP is only 8% and eastern productivity is just 30% that of the west even though eastern wages are at roughly 70% of western levels. The privatization agency for eastern Germany, Treuhand, has privatized more than 90% of the 13,000 firms under its control and will likely wind down operations in 1994. Private investment in the region continues to be lackluster, resulting primarily from the deepening recession in western Germany and excessively high eastern wages. Eastern Germany has one of the world's largest reserves of low-grade lignite coal but little else in the way of mineral resources. The quality of statistics from eastern Germany is improving, yet many gaps remain; the federal government began producing all-German data for select economic statistics at the start of 1992. The most challenging economic problem is promoting eastern Germany's economic reconstruction—specifically, finding the right mix of fiscal, monetary, regulatory, and tax policies that will spur investment in eastern Germany—without destabilizing western Germany's economy or damaging relations with West European partners. The government hopes a "solidarity pact" among labor unions, business, state governments, and the SPD opposition will provide the right mix of wage restraints, investment incentives, and spending cuts to stimulate eastern recovery. Finally, the homogeneity of the German economic culture has been changed by the admission of large numbers of immigrants.
<item><hi format=bold>National product:</hi>
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<item>• <hi format=ital>Germany:</hi> GDP—purchasing power equivalent—$1.331 trillion (1993)
<item>• <hi format=ital>western:</hi> GDP—purchasing power equivalent—$1.218 trillion (1993)
<item>• <hi format=ital>eastern:</hi> GDP—purchasing power equivalent—$112.7 billion (1993)
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<item><hi format=bold>National product real growth rate:</hi>
<item>• <hi format=ital>consumption per capita:</hi> 7,160 kWh (1992)
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<item><hi format=bold>Industries:</hi>
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<item>• <hi format=ital>western:</hi> among world's largest producers of iron, steel, coal, cement, chemicals, machinery, vehicles, machine tools, electronics; food and beverages
<item>• <hi format=ital>eastern:</hi> metal fabrication, chemicals, brown coal, shipbuilding, machine building, food and beverages, textiles, petroleum refining
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<item><hi format=bold>Agriculture:</hi>
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<item>• <hi format=ital>western:</hi> accounts for about 2% of GDP (including fishing and forestry); diversified crop and livestock farming; principal crops and livestock include potatoes, wheat, barley, sugar beets, fruit, cabbage, cattle, pigs, poultry; net importer of food
<item>• <hi format=ital>eastern:</hi> accounts for about 10% of GDP (including fishing and forestry); principal crops—wheat, rye, barley, potatoes, sugar beets, fruit; livestock products include pork, beef, chicken, milk, hides and skins; net importer of food
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<item><hi format=bold>Illicit drugs:</hi> source of precursor chemicals for South American cocaine processors; transshipment point for Southwest Asian heroin and Latin American cocaine for West European markets
<item><hi format=bold>Economic aid:</hi>
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<item>• <hi format=ital>western-donor:</hi> ODA and OOF commitments (1970-89), $75.5 billion
<item>• <hi format=ital>eastern-donor:</hi> bilateral to non-Communist less developed countries (1956-89) $4 billion
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<item><hi format=bold>Currency:</hi> 1 deutsche mark (DM)=100 pfennige
<item><hi format=bold>Exchange rates:</hi> deutsche marks (DM) per US$1—1.7431 (January 1994), 1.6533 (1993), 1.5617 (1992), 1.6595 (1991), 1.6157 (1990), 1.8800 (1989)
<item><hi format=bold>Fiscal year:</hi> calendar year
