Economic Situation in Germany

German Economy from Crisis to Boom: A Model for Recovery?

October 18 -21, 2010 Bangkok, Thailand

Oliver Wieck Managing Director Department for International Trade and Development

Economic Situation in Germany

    Germany is experiencing a remarkable rebound in 2010. GDP will see an estimated 3.5% growth rate.

World economy is still amidst an upswing, but growth dynamics have slightly lost momentum. Emerging economies are showing high growth rates. USA and Eurozone (excluding Germany) however, with somewhat muted growth rates and growth perspectives.

Germany is reaping benefits from positive global economic climate. Exports have soared significantly; but domestic demand as well is kicking in at a stronger pace. Stable labor market is fueling private consumption, capital goods spending is picking up.

Risks are still virulent, but have proved to be manageable. Structural problems among European countries remain major task to be addressed to avoid further frictions between member states.

2

Export of (Industrial) Goods Driving force Germany‘s Growth

    Germany represents just 1% of the world‘s population but accounts for 8 % of global export volume Among „green technologies“ the share is even higher (16%) German exports have doubled between 1999 and 2009 Foreign sales account for ¾ of DAX-30-Companies‘ turnover, for some German „Mittelstand“ companies the share is 90%   Almost 50% of German GDP is earned abroad Export was responsible for Germany‘s high pre-crisis growth rates and has contributed to the reduction of unemployment 3

German Exports

80 75 70 90 85 Jan-Jul 2010 as compared to Jan-Jul 2009 + 18.3% 65 60 2008 2009 2010 Source: Federal Statistical Office, German Central Bank France USA United Kingdom China Spain Czech Republic T urkey Japan Brazil South Korea India Changes in exports with selected trading partners Jan-Jun 2010 as compared to Jan-Jun 2009 10.2% 14.1% 13.2% 15.1% 17.2% 24.3% 21.1% 38.8% 37.9% 55.5% 61.3% 4

Emerging Markets continue to grow

Emerging Markets continue to grow Real GDP, y-o-y-change in % 2009 2010 2011

1,7 1,5 3,3 2,0 2,6 2,3 2,8 1,5 4,0 4,3 9,1 10,5 9,6 5,7 9,7 8,4 7,5 4,1 -0,2 -2,6 -4,1 -4,7 -5,2

Eurozone Germany USA Source: IMF, World Economic Outlook October 2010 Japan

-7,9

Russia China India Brazil 5

Pre-crisis Level has not been reached yet

Industry's remarkable recovery Production index of manufacturing industry, (2005=100), seasonally adjusted 130 120 110

Highest level 117.0

- 24.3% 100 90 80 + 32.1%

Lowest level 88.6

Status acc. to BDI Economic Report 04/09 94.6

Status acc. to BDI Economic Report 01/10 96.8

70

Current Status 106.5

60 February 2008 April 2009 August 2009 November 2009 August 2010 Source: Federal Statistical Office Production index of manufacturing industry, (2005=100), seasonally adjusted 130 - 37.7% + 60.4% 120

Highest level 125.6

110 100

Current Status 111.1

90 80

Status acc. to BDI Economic Report 04/09 91.7

Status acc. to BDI Economic Report 01/10 94.3

70

Lowest level 78.3

60 November 2007 February 2009 August 2009 November 2009 August 2010 6

Germany as a Model for Recovery?

      As an export nation Germany was one of the countries hardest hit by the crisis The crisis was used by companies to further enhance their own competitiveness Policy-makers have taken the right steps: debt reduction before the crisis, during the crisis: short-time work, scrapping premiums, economic stimulus programmes State support is now running out, consolidation is coming to the forefront Companies are now benefiting from the worldwide upswing with innovative products, „green technology“, flexibility of SMEs However: all the homework has not yet been done, additional challenges 7

Challenge: Demographic Change

World Population, billion inhabitants 10 9 8 3 2 1 0 7 6 5 4 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 Share in % North Nordamerika America Lateinamerika America 5,1 4,8 7,2 11,0 8,6 8,4 14,5 21,7 57,3 60,4 Source: UN, IW 100 90 80 70 60 50 40 30 20 10 0 Population Germany, million inhabitants 84 82 80 78 76 74 72 70 68 66 64 62 2010 2020 2030 2040 25,6 55,4 19,0 2008 30,7 52,2 17,0 2020 36,8 60 Jahre und ält er 46,5 38,3 45,7 20 bis unter 60 Jahre 16,7 Unter 20 Jahre 16,0 2030 2040 2050 40,2 44,4 15,4 2050 40,5 43,9 15,6 2060 2060 Source: Federal Statistical Office 8

BDI – Proposal to boost Growth

         Strengthen

Social Market Economy

and principle of

sustainability

Enhance Europe’s

competitiveness

Bolster up capacity for

innovation

, enhance

education

Stabilize financial markets, safeguard

business funding

Stop protectionism, intensify

free trade

Expand

infrastructure

, realize sustainable mobility Unite growth, competitiveness and

climate protection

Realize comprehensive

energy-strategy

Make digital

information society

come true 9

Thank you!