The Economy of Germany

As a member of the elite group of G8 industrialized nations, Germany is the 4th largest economy in the world and the largest economy in Europe. Its GDP was 3.3 trillion USD in 2007. Germany's economy made a stuttering start during the Second World War under the reign of Hitler. Much importance was given to arms production while other sectors didn't get as much attention.

The post war era saw Germany adopt liberal industrial policies with major reforms being introduced between 1990 and 2000. This led to the development of several large home-grown industries as well as healthy foreign trade.

Economic pundits call Germany as a social market economy with government intervention in the form of subsidies in many sectors. Much of its financial growth is attributed to its export-oriented policies. More than half of its growth has been credited to exports during the last decade. Germany has also sought stronger ties between members of the European Union.

Germany's strength has been in industries such as infrastructure and engineering, automobiles, aerospace, logistics, precision engineering, environmental technology and optics. Agriculture forms a miniscule 0.9% of the country's GDP.

Highlights of the German Economy

  • 37 companies of the Fortune 500 companies are headquartered in Germany
  • Services sector accounts for nearly 30% of the country's GDP
  • Leader in engineering and design
  • Home to world famous brands like Mercedes Benz, BMW, Henkel, Audi, Porsche, Volkswagen, Deustche Bank, Siemens and SAP
  • Leading producer of wind and solar power technologies

Agriculture: Unlike other European nations, agriculture accounts for less than 2% of the GDP of Germany. In 2008, it employed only about 2.5% of the population. However Germany is able to meet its food needs by domestic production. Wheat, potato, barley, beets, oats and cabbages are the major agricultural products. Despite the low contribution to its GDP, Germany is the third largest agricultural producer in Europe.

Labor: Germany's workforce is considered to be the most technically qualified amongst other nations in Europe. Vocational and technical training is given equal importance to. Experts believe that Germany's success in the industrial sector as opposed to the agricultural sector is due to its highly-trained and qualified workforce.

Manufacturing: Automobiles, machine tools and chemicals are the major industries in Germany. The German automobile industry is the world's 3rd largest producer, after the US and Japan. Germany is also credited to having the largest market share in machine tools (20% in 2004). The German industry is a mix of large multinational firms and an array of smaller manufacturing companies that cater to a niche market.

Infrastructure and Energy: Owing to its geographical location in Europe, Germany is an important transportation hub. The world famous Autobahn road network connects German cities and towns with other important destinations in Europe. It has an extensive network of high speed trains.

Germany is the 5th largest consumer of energy in the world; nearly 60% of its energy needs are met through imports. The German government is also an active proponent of climate change and has made considerable efforts to harness alternate sources of energy such as solar power and wind energy.

Services Sector: Germany's services sector accounts for 30% of the country's GDP. It is also the largest employer in the country with 70% of the population being employed in the services sector. IT, transportation, financial services and hospitality are the major service industries in Germany.

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