The Economy of Germany

Economic Development
According to the World Bank, the Gross Domestic Product of Germany was 3868.29 billion USD in 2014, rank 4 globally. The GDP per capita was 47767.00 USD positioning Germany at rank number 17 in the world in terms of economic development.

However, GDP per capita in USD may not correctly reflect the real incomes in a country. Many countries with high income also have high prices and, similarly, many countries with low income have low prices. The purchasing power parity (PPP) income accounts for such differences in prices so we can answer the question: "What would be the income in Germany if its citizens paid U.S. prices?" World Bank data from 2014 show that GDP per capita in Germany in PPP terms was 43552.29 USD which places Germany at rank 17 in the world.

Yet, others argue that GDP per capita in USD or in PPP terms may be an incomplete measure of social welfare. For a more comprehensive indicator, we could look at the Human Development Index developed by the United Nations. The HDI ranges from 0 (low development) to 1 (high development) and reflects income as well as life expectancy and education. The value of the Human Development Index for Germany in 2014 is 0.92, rank 6 in the world.
Indicator
Value
Global rank
Year
GDP, billion USD 3868.29 4 2014
GDP per capita, USD 47767.00 17 2014
GDP per capita, PPP, USD 43552.29 17 2014
Human Development Index 0.92 6 2014


International Trade and Investment
The total value of exports of goods and services from Germany to the rest of the world is 45.73 percent of its GDP. For that indicator, Germany ranks at place 57 globally. Note that if exports are greater than about 60 percent of GDP, this indicates an export-oriented economy. In contrast, values lower than about 15 percent of GDP indicate a relatively closed economy.

The trade balance of Germany, i.e. the value of exports minus imports, is 6.74 percent of GDP. Note that a negative number means a trade deficit and a positive number means a trade surplus. An even more useful indicator is the Current Account balance which includes the trade balance as well as income received or sent by the country and gifts and foreign aid. The value for Germany is 7.27 percent of GDP. Current account deficits greater than about 4 percent of GDP for many years are typically not sustainable. They have to be financed by new international debt every year leading to high levels of indebtedness and currency crises.

We can look at the international competitiveness of Germany using the Competitiveness index of the World Trade Organization. The index ranks countries on a 1 - 7 scale and reflects the stability of a country, its health, education, market efficiency, financial market sophistication, technological readiness, market size, and innovation. For that indicator, Germany is at rank 6 in the world with a value of 5.49 points.

Foreign direct investment into Germany was 8.39 billion USD in 2014 which is 0.24 percent of GDP. We look primarily at the percent of GDP as opposed to the dollar amounts because larger economies would normally attract greater volumes of foreign investment. Values above 4-5 percent of GDP suggest that the country is an attractive foreign investment destination.

The FDI Confidence Index by A.T. Kearney is calculated as a weighted average of the number of high, medium and low responses to questions about the likelihood of direct investment in a market over the next three years. Index values are based on non-source-country responses. Higher Index values indicate more attractive investment targets. The score for Germany is 1.89 on a scale from 0 (low confidence) to 3 (high confidence).
Indicator
Value
Global rank
Year
Exports, percent of GDP 45.73 57 2014
Trade balance, percent of GDP 6.74 26 2014
Current account balance, percent of GDP 7.27 14 2014
Competitiveness index, 1 (low) - 7 (high) 5.49 6 2014
Foreign Direct Investment, percent of GDP 0.24 166 2014
Foreign Direct Investment, billion USD 8.39 31 2014
A. T. Kearney FDI Confidence Index, 0 (low confidence) - 3 (high confidence) 1.89 5 2015


Financial System
The development of the banking system, a key part of the financial system of any country, is reflected in the level of credit to the private sector as percent of GDP. Credit allows firms to expand their production and to improve their technology. It also allows households to spread large expenses over time such as for a house, vehicles or education. The average value for the world for that indicator is about 45 percent of GDP. Values below 15 percent of GDP are considered very low whereas values in excess of 100 percent of GDP bring no additional benefit to the economy. According to the International Monetary Fund, the value of that indicator for Germany is 79.63 percent, rank 29 in the world.

The other main component of the financial system is the stock market. Like banks, it serves to channel the free money in the economy (savings) to various business projects. The size of the stock market in Germany is measured by its so-called capitalization, i.e. the number of outstanding shares times their prices, as percent of GDP. For Germany, that indicator has a value of 44.94 percent of GDP.

The capitalization of a stock market measures its volume but not necessarily its activity. Some countries have large stock markets where relatively few large companies are listed and whose shares are seldom traded. For the activity of stock markets we look at the so-called turnover ratio: the total value of shares traded during a period divided by the average market capitalization for that period. The turnover ratio in Germany is 84.19 percent. As a reference, the stock market turnover ratio in the very active stock markets is about 100 percent or higher while in the least active stock markets it is below 20 percent.
Indicator
Value
Global rank
Year
Bank credit to the private sector, percent of GDP 79.63 29 2014
Stock market capitalization, percent of GDP 44.94 32 2014
Stock market turnover ratio 84.19 9 2015


Rule of Law
The World Bank publishes a very useful index called "Rule of Law" that captures perceptions of the extent to which people in Germany and other countries have confidence in and abide by the rules of society, and in particular the quality of contract enforcement, property rights, the police, and the courts, as well as the likelihood of crime and violence. The index has been compiled for many years and is comparable across countries. You can click on the link to it in the table and explore its trends for Germany over time as well as its components. It ranges from -2.5 (weak rule of law) to 2.5 (strong rule of law). The rule of law in Germany is scored at 1.85 in 2015, rank 16 globally.

Transparency International is an NGO that has tracked the perceptions of corruption in many countries for many years. For each country, they collect data from multiple surveys and produce a composite measure: the "Transparency International Corruption Perceptions Index." The index ranges from 0 (pervasive corruption) to 100 (no corruption). Based on 2015 data, the value of that indicator for Germany is 81.00 which places Germany at position 10 in the world.

The "Civil Liberties" index published annually by the Freedom House measures the freedom of expression and belief, associational and organizational rights, rule of law, and personal autonomy and individual rights. The range is from 1 (strong civil rights) to 7 (weak civil rights). On that count, the score for Germany in 2014 was 1.00.
Indicator
Value
Global rank
Year
Rule of law, -2.5 (weak) - 2.5 (strong) 1.85 16 2014
Corruption Perceptions Index, 0 (high corruption) - 100 (low corruption) 81.00 10 2015
Civil Liberties, 1 (strong) - 7(weak) 1.00 See world ranking 2014


Main economic indicators
Economic growth: the rate of change of real GDP
Gross Domestic Product, billions of U.S. dollars
Gross Domestic Product, billions of 2010 U.S. dollars
GDP per capita, current U.S. dollars
GDP per capita, Purchasing Power Parity
GDP per capita, constant 2010 dollars
Human Development Index (0 - 1)
Inflation: percent change in the Consumer Price Index
Capital investment as percent of GDP
Capital investment, billion USD
Household consumption as percent of GDP
Household consumption, billion USD
Household debt to GDP, in percent
Savings as percent of GDP
Savings, billion USD
Government spending as percent of GDP
Government spending, billion USD
Government budget balance as percent of GDP
Government debt as percent of GDP
Value added by industry as percent of GDP
Value added by the manufacturing sector as percent of GDP
Value added in the services sector as percent of GDP
Industry value added, billion USD
Manufacturing value added, billion USD
Services value added, billion USD
Shares of world totals
International transactions
Labor force
Infrastructure and transport
Energy and environment
Agriculture
Financial system
Innovation
Taxes
Governance and political system
Economic freedom
Health
Education
Globalization
Country risk
Industry: Oil, coal, and electricity
Oil reserves, billion barrels
Oil production, thousand barrels per day
Gasoline production, thousand barrels per day
Jet fuel production, thousand barrels per day
Liquefied petroleum gas production, thousand barrels per day
Oil consumption, thousand barrels per day
Gasoline consumption, thousand barrels per day
Jet fuel consumption, thousand barrels per day
Liquefied petroleum gas consumption, thousand barrels per day
Coal production, thousand short tons
Coal consumption, thousand short tons
Coal imports, thousand short tons
Coal exports, thousand short tons
Electricity production, billion kilowatthours
Nuclear power generation, billion kilowatthours
Hydroelectricity generation, billion kilowatthours
Electricity consumption, billion kilowatthours
Electricity production capacity, million kilowatts
Electricity imports, billion kilowatthours
Electricity exports, billion kilowatthours
Renewable power generation, billion kilowatthours
Renewable power consumption, billion kilowatthours
Crime
Religions
Other indicators