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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.
© dpa

Germany is the largest economy in the European Union (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) 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’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, which has become an export 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 has formed the basis of German economic policy. 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, 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 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 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.