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Business & innovation

A Strong Hub

Germany is the world’s fourth-largest economy, highly innovative and has a strong focus on exports. The future lies in Industry 4.0.
Lackierroboter
© dpa

Germany is the largest economy in the European Union European Union In 1957, the Federal Republic was one of the six founder members of the current European Union (EU). Since 2013, the EU has consisted of 28 member states and the euro is the official tender in 19 of them. Germany contributes about 20% to the EU budget. Günther Oettinger (CDU), the former Prime… Read more › (EU) and the fourth largest in the world after the USA, China, and Japan. The German economy has its great innovativeness and strong focus on exports to thank for its competitiveness and global networking. In high-selling sectors, such as car-making, mechanical and plant engineering, the chemicals industry and medical technology, exports account for well over half of total sales. In 2018, only China and the USA exported more goods. Germany’s most important trading partners are the European Union countries, the USA, and China. In 2018 Germany invested 104.8 billion euros in research and development (R&D). For most German companies, the mega-trends of digitisation (Internet of Things, artificial intelligence, Blockchain, cyber security, smart systems, e-commerce) present a major challenge. At the same time, they offer opportunities for a productive and growing start-up scene in Germany.

Gross domestic product (GDP) 2018 (in US$ billion)

Source: World Bank

Small and medium-sized enterprises and industry

Accounting for more than 99 percent of all companies, small and medium-sized enterprises ( SMEs SMEs The German economy is characterized first and foremost by small and medium-sized enterprises as well as the self-employed and the independent professions. Some 99.6 percent of all companies are small and medium-sized enterprises. These are firms with annual sales of below EUR 50 million and a… Read more › ) form the backbone of the economy and are also characterised by their high share of industrial production. They supplement the corporations listed primarily in the DAX index at the Frankfurt Stock Exchange, the most important financial centre in Continental Europe. The European Central Bank, which as an EU institution amongst other things is the guardian of the euro Euro The euro is the currency of the European Monetary Union and after the US dollar the second most important member of the international currency system. Together with the nation­al central banks, the European Central Bank (ECB), head­quartered in Frankfurt/Main, is responsible for monetary policy… Read more › ’s stability, is also headquartered in Frankfurt/Main.

The positive economic momentum of the 2010s has led to a favourable trend on the labour market. Germany is one of the countries with the highest employment rates in the EU and is the country with the lowest youth unemployment percentage. This underscores the value of dual vocational training Vocational training Germany’s two-track vocational training system is quite special internationally speaking. On completing school, approximately half of young people in Germany move on to learn one of the some 330 officially recognized vocations included in the Two-Track System. This entry into professional life… Read more › , which has become an export Export Germany is one of the leading export nations. In 2017 it exported goods and services valued at some 1,279 billion Euros. The balance of foreign trade fort he year posted a surplus of 245 billion Euros. Germany has above all the strong performance of its industry to thank for its strength in… Read more › commodity in its own right and is being adapted by many countries. Factors such as the availability of skilled labour, infrastructure, and legal certainty are further characteristics of Germany, which is very high on the list in many international rankings. Peter Altmaier (CDU) heads the Federal Ministry for Economic Affairs and Energy.

The world’s largest trading nations in 2018 
(share of world exports)

Source: BmWi

A social market economy as the basis

Since 1949 the idea of a social market economy Social market economy The Basic Law of the Federal Republic of Germany does not call for any particular economic order. Yet it is firmly anchored in the principle of the welfare state and therefore excludes a purely free market economy. Since the founding of the Federal Republic of Germany in 1949 the country’s economic… Read more › has formed the basis of German economic policy Economic policy In line with the federal system, structuring and coordinating economic and financial policy is the joint task of central government, the federal states and munici­palities. They cooperate in various committees. Furthermore, the Federal Government seeks the advice of independent economists. Every… Read more › . The social market economy guarantees free entrepreneurial activity while at the same time endeavouring to create social checks and balances. Formulated in the post-War years by Ludwig Erhard, who was later to become Federal Chancellor Federal chancellor The Federal Chancellor is the only member of the Federal Government to be elected. The constitution empowers him to personally choose his ministers, who head the most important political authorities. Moreover it is the Chancellor who determines the number of ministries and their responsibilities… Read more › , the concept has kept Germany’s economic development on a successful track. Germany actively engages in shaping globalisation and champions a sustainable global economic system, which offers fair opportunities to everyone.

Germany is one of the 12 countries which introduced the euro Euro The euro is the currency of the European Monetary Union and after the US dollar the second most important member of the international currency system. Together with the nation­al central banks, the European Central Bank (ECB), head­quartered in Frankfurt/Main, is responsible for monetary policy… Read more › in 2002. The financial market crisis (2008) and the subsequent debt crisis affected the whole of the Eurozone, Germany included. To combat adverse impacts, the Federal Government Federal Government The Federal Government and cabinet is made up of the Federal Chancellor and the Federal Ministers. While the Chancellor holds the power to issue directives, the ministers have departmental powers, meaning that they independently run their respective ministries in the framework of those directives… Read more › employed a twin-track strategy, which involved not taking on any new debt and adopting measures to bolster innovativeness. Since 2014 the government has been able to present a balanced federal budget six times in a row.

Consequences of the Corona pandemic

As a result of the Coronavirus crisis in the spring of 2020, economic experts expect a sharp economic downturn, a rise in the unemployment rate and, as a consequence of the financial stabilisation measures, a record deficit in the national budget. However, in their April 2020 joint forecast the experts from the major institutes for economic research predict that Germany will cope with the economic slump and in the medium term achieve economic output levels on a par with what it would have had without the crisis.