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1994-05-02
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<text>
<title>
Germany: Economy
</title>
<article><hdr>The World Factbook 1993: Germany
Economy</hdr><body>
<p>Overview: 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 have sunk western Germany deeper into recession. The
western German economy grew by less than 1% in 1992 as the Bundesbank
set high interest rates to offset the inflationary effects of large
government deficits and high wage settlements. Eastern Germany grew
by 6.8% in 1992 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 1992 accounted for about
21.5% of GDP. GDP in the western region is now $20,000 per capita, or
85% 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 7% 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 four-fifths of the almost 12,000
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.
</p>
<list>
<l>National product:</l>
<l> Germany: GDP - purchasing power equivalent - $1.398 trillion
(1992)</l>
<l> western: GDP - purchasing power equivalent - $1.294 trillion
(1992)</l>
<l> eastern: GDP - purchasing power equivalent - $104 billion
(1992)</l>
</list>
<list>
<l>National product real growth rate:</l>
<l> Germany: 1.5% (1992)</l>
<l> western: 0.9% (1992)</l>
<l> eastern: 8% (1992)</l>
</list>
<list>
<l>National product per capita:</l>
<l> Germany: $17,400 (1992)</l>
<l> western: $20,000 (1992)</l>
<l> eastern: $6,500 (1992)</l>
</list>
<list>
<l>Inflation rate (consumer prices):</l>
<l> western: 4% (1992)</l>
<l> eastern: NA%</l>
</list>
<list>
<l>Unemployment rate:</l>
<l> western: 7.1% (1992)</l>
<l> eastern: 13.5% (December 1992)</l>
</list>
<list>
<l>Budget:</l>
<l> western (federal, state, local): revenues $684 billion;
expenditures $704 billion, including capital expenditures $NA
(1990)</l>
<l> eastern: revenues $NA; expenditures $NA, including capital
expenditures of $NA</l>
</list>
<list>
<l>Exports: $378.0 billion (f.o.b., 1991)</l>
<l> commodities: manufactures 86.6% (including machines and machine
tools, chemicals, motor vehicles, iron and steel products),
agricultural products 4.9%, raw materials 2.3%, fuels 1.3%</l>
<l> partners: EC 54.3% (France 12.9%, Netherlands 8.3%, Italy 9.3%,
UK 7.7%, Belgium-Luxembourg 7.4%), other Western Europe 17.0%, US
6.4%, Eastern Europe 5.6%, OPEC 3.4% (1992)</l>
<l>Imports: $354.5 billion (f.o.b., 1991)</l>
<l> commodities: manufactures 68.5%, agricultural products 12.0%,
fuels 9.7%, raw materials 7.1%</l>
<l> partners: EC 52.0 (France 12.0%, Netherlands 9.6%, Italy 9.2%,
UK 6.8%, Belgium-Luxembourg 7.0%), other Western Europe 15.2%, US
6.6%, Eastern Europe 5.5%, OPEC 2.4% (1992)</l>
</list>
<p>External debt: $NA
</p>
<list>
<l>Industrial production:</l>
<l> western: growth rates -5% (1992 est.)</l>
<l> eastern: $NA</l>
</list>
<p>Electricity: 134,000,000 kW capacity; 580,000 million kWh produced,
7,160 kWh per capita (1992)
</p>
<p>Industries:
</p>
<p> western: among world's largest producers of iron, steel, coal,
cement, chemicals, machinery, vehicles, machine tools, electronics;
food and beverages
</p>
<p> eastern: metal fabrication, chemicals, brown coal, shipbuilding,
machine building, food and beverages, textiles, petroleum
refining
</p>
<p>Agriculture:
</p>
<p> western: 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; fish catch of
202,000 metric tons in 1987
</p>
<p> eastern: 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; fish catch of 193,600 metric
tons in 1987
</p>
<p>Illicit drugs: source of precursor chemicals for South American
cocaine processors
</p>
<list>
<l>Economic aid:</l>
<l> western: donor - ODA and OOF commitments (1970-89), $75.5
billion</l>
<l> eastern: donor - $4.0 billion extended bilaterally to
non-Communist less developed countries (1956-89)</l>
</list>
<p>Currency: 1 deutsche mark (DM)=100 pfennige
</p>
<p>Exchange rates: deutsche marks (DM) per US$1 - 1.6158 (January
1993), 1.5617 (1992), 1.6595 (1991), 1.6157 (1990), 1.8800 (1989),
1.7562 (1988)
</p>
<p>Fiscal year: calendar year
</p></body></article></text>